DPS in Computing Studies, Assistant Professor of Management Information Systems, Leo J. Meehan School of Business, Stonehill College, MA, USA
PhD in Finance, Assistant Professor of Accounting, Leo J. Meehan School of Business, Stonehill College, MA, USA
Master of Science in Economics, Researcher Scholar, Albanian Customs Administration, Albania
Tax evasion and tax avoidance are among the most addressed topics in economic literature in recent years, as one of the most discussed issues in different countries. The research’s primary purpose is to present Albanian residents’ and taxpayers’ perceptions regarding tax evasion, tax avoidance, and tax compliance. The leading indicators used in this report, the attitude towards tax evasion and tax avoidance, rely on individual taxpayers’ perceptions and not on factual evidence such as the amount of income hidden from the tax authorities. Several studies have been done in different countries regarding the population’s perception regarding factors affecting evasion. In this paper, we investigated the following logical sequence: in the beginning, we provided an overview of the fiscal system and legislation, informal economy, and fiscal evasion in Albania. This analysis data was taken from reports from national and international organizations. After this, we analyzed data obtained from a survey issued to 387 taxpayer individuals in Albania. Our objective was to identify, using empirical analysis, factors that influence an individual’s ethical perception of tax avoidance and evasion. The statistical analyses we carried out in the paper were factor analyses and ordinal logistic linear regression analyses using the JMP statistical software. Based on the empirical research, we concluded that government policies positively correlate with taxpayers’ behavior regarding tax compliance. Among other determinants influencing tax evasion, we have evaluated that higher tax rates are an essential element. The results of the research can be helpful for governments and other policymakers’ institutions.
Keywords: Factors, Fiscal Evasion, Reform, Taxpayers, Tax Compliance.
JEL Classification: H21, H24, H26.
Cite as: Salé, M.J., Muharremi, O., Hoxhaj, M. (2021). Albanian Individual Taxpayers Perceptions and Determinants on Ethical Behavior Regarding Tax Compliance. Business Ethics and Leadership, 5(1), 66-80. https://doi.org/10.21272/bel.5(1).66-80.2021
This work is licensed under a Creative Commons Attribution 4.0 International License
- Abdu, M., Jibir, J. & Muhammad, T. (2021). Analysis of Tax Compliance in Sub-Saharan Africa: Evidence from Firm-Level Study. Econometric Research in Finance, 5(2), 119-142. https://doi.org/10.2478/erfin-2020-0007.
- Adebisi, J.F. & Gbegi, D.O. (2013). Effect of Tax Avoidance and Tax Evasion on Personal Income Tax Administration in Nigeria. American Journal of Humanities and Social Science, 1(3), 125-134. https://doi.org/10.11634/232907811604328.
- Alm, J. & Torgler, B. (2011). Do Ethics Matter? Tax Compliance and Morality. Journal of Business Ethics, 101, 635-651. https://doi.org/10/1007/s10551-011-0761-9
- Alm, J., Martinez-Vazquez, J. & McClellan, C. (2016). Corruption and firm tax evasion. Journal of Economic Behaviour & Organization, 124, 146-163. DOI:10.1016/j.jebo.2015.10.006.
- Andoni, M., Osmani M. & Kambo, A. (2017). Assessing Determinants of Tax Evasion in Albania-A Multinomial Econometric Approach, European Journal of Business, Economics and Accountancy, 5(3), 9-21. Available at: http://www.idpublications.org/wp-content/uploads/2017/04/Full-Paper-ASSESSING-DETERMINANTS-OF-TAX-EVASION-IN-ALBANIA.pdf.
- Andrighetto, G., Zhang, N., Ottone, S., Ponzano, F., D’Attoma, J. & Steinmo, S. (2016). Are Some Countries More Honest than Others? Evidence from a Tax Compliance Experiment in Sweden and Italy. Front. Psychol, 7, 472. https://doi.org/10.3389/fpsyg.2016.00472.
- Bosco, L. & Mittone, L. (1997). Tax evasion and moral constraints: some experimental evidence. Kyklos, 50, 297-324. https://doi.org/10.1111/1467-6435.00018.
- Camerer, F.C., Ho, T-H. & Chong, J-H. (2004). A Cognitive Hierarchy Model of Games. The Quarterly Journal of Economics, 119(3), 861-898. https://doi.org/10.1162/0033553041502225.
- Chen, H., Schneider, F. & Sun, Q. (2019). Measuring the size of the shadow economy in 30 provinces of China over 1995-2016: The MIMIC approach. Pacific Economic Review, 25(3), 307-453. https://doi.org/10.1111/1468-0106.12313
- Chiarini, B., Marzano, E. & Schneider, F. (2013). Tax Rates and tax evasion: an empirical analysis of the long run aspects in Italy. European Journal of Law and Economics, 35, 273-293. https://doi.org/10.1007/s10657-011-9247-6.
- D’ Attoma, J., Volintiru, C. & Steinmo, S. (2017). Willing to share? Tax compliance and gender in Europe and America. Research and Politics, 4(2), 1-10. https:doi.org/10.1177/2053168017707151.
- Feld, L. & Frey, B. (2002). Trust Breeds Trust: How Taxpayers are Treated. Economics of Governance, 3, 87-99. http://dx.doi.org/10.1007/s101010100032.
- Feige, E. (1990). Defining and Estimating Underground and Informal Economies: The New Institutional Economics Approach. World Development, 18(7), 989-1002. https://doi.org/10.1016/0305-750X(90)90081-8.
- Fischer, C.M., Wartick, M. & Mark, M. (1992). Detection probability and taxpayer compliance: A review of the literature. Journal of Accounting Literature, 11, 1-46. Available at: https://search.proquest.com/openview/181022c45a0e3880d623df038bc7e494/1?pq-origsite=gscholar&cbl=31366.
- Fisman, R., & Wei, S. (2004). Tax Rates and Tax Evasion: Evidence from “Missing Import” in China. Journal of Political Economy, 112(2), 471-500. DOI:10.1086/381476.
- Gashi, M. & Kukaj, H. (2016). The Effect of Tax Rates on Fiscal Evasion and Avoidance. European Journal of Sustainable Development, 5(1), 31-38. https://doi.org/10.14207/ejsd.2016.v5n1p31.
- Hofmann, E., Hoelzl, E., & Kirchler, E. (2008). Preconditions of Voluntary Tax Compliance: knowledge and evaluation of Taxation, Norms, Fairness, and Motivation to Cooperate, Zeitschrift für Psychologie/J Psychol, 216(4), 209-217. https://doi.org/10.1027/0044-3409.216.4.209.
- Kasipillai, J., Aripin, N., & Amran, N. (2013). The Influence of Education on Tax Avoidance and Tax Evasion. eJournal of Tax Research, [online] 1(2). Available at: http://www.austlii.edu.au/au/journals/eJTR/2003/7.html.
- Kleven, H., Knudsen, M., Kreiner, C., Pedersen, S., & Saez, E. (2011). Unwilling or Unable to Cheat? Evidence from a Tax Audit Experiment in Denmark. Econometrica, 79(3), 651-692. Available at: http://www.jstor.org/stable/41237767.
- Kirchler, E. (2007). The economic psychology of tax behaviour. Cambridge University Press. https://doi.org/10.1017/CBO9780511628238.
- Kogler, C., Batrancea, L., Nichita, A., Pantya, J., Belianin, A., and Kirchler, E. (2013). Trust and power as determinants of tax compliance: Testing the assumptions of the slippery slope framework in Austria, Hungary, Romania, and Russia. Journal of Economic Psychology, 34, 169-180. http://dx.doi.org/10.1016/j.joep.2012.09.010.
- Kogler, C., & Kirchler, E. (2019). Taxpayers’ Subjective Concepts of Taxes, Tax Evasion, and Tax Avoidance. Ethics and Taxation. https://doi.org/10.1007/978-981-15-0089-3_8.
- Mamuti, A., & McGee, R. (2016). Tax Evasion as a Crime: A Survey of Perception in Kosovo. http://dx.doi.org/10.2139/ssrn.2987724.
- McGee, W. (2006). Three Views on the Ethics of Tax Evasion. Journal of Business Ethics, 67, 15-35. https://doi.org/10/1007/s10551-006-9002-z.
- McGee, R.W. (2014). The Ethics of Tax Evasion: A Case Study of Brazil. In B. Christiansen (Ed.), Handbook of Research on Economic Growth and Technological Change in Latin America, IGI Global, Hershey, PA, USA: IGI Global, 374-393. https://doi.org/10.4018/978-1-4666-6224-7.ch022.
- Muceku, H., & Balliu, T. (2017). The Albanian Taxpayers’ Perception of the Current Tax System and Its Impact on Informal Economy, Tax Evasion and Tax Avoidance. Mediterranean Journal of Social Sciences, 8(1), 470. Available at: https://www.richtmann.org/journal/index.php/mjss/article/view/9719.
- Muharremi, O., Madani, F., & Pelari, E. (2014). Tax Evasion and Set Backs of the Shadow Economy in Albania. Mediterranean Journal of Social Sciences, 5(13), 398-408. Available at: https://www.richtmann.org/journal/index.php/mjss/article/view/3601.
- Oberholzer, R. (2008). Attitudes of South African taxpayers towards taxation: a pilot study. UPSpace Collection, 44-69. Available at: http://visar.csustan.edu/aaba/Oberholzer2008.pdf.
- OECD (2004). The informal economy in Albania. Analysis and policy recommendations. Central European Initiative (CEI). Available at: link.
- Onu, D., & Oats, L. (2016). Paying tax is part of life: Social norms and social influence in tax communications. Journal of Economic Behavior & Organization, 124, 29-42. https://doi.org/10.1016/j.jebo.2015.11.017.
- Payne, J.E., & Saunoris, J.W. (2020). Corruption and Firm Tax Evasion in Transition Economies: Results from Censored Quantile Instrumental Variables Estimation. Atlantic Economic Journal, 48(2), 195-206. https://doi.org/10/1007/s11293-020-09666-2.
- Razak, A.A., & Adafula, C.J. (2013). Evaluating taxpayers’ attitude and its influence on tax compliance decisions in Tamale, Ghana. Journal of Accounting and Taxation, 5(3), 48-57. http://dx.doi.org/10.5897/JAT2013.0120.
- Santoro, A. (2010). L’evasione fiscale. Quanto, come e perché [Tax evasion, how much, how and why?], pp. 18-29.
- Sanyal, A., Gang, I. N., & Goswami, O. (2000). Corruption, tax evasion, and Laffer Curve. Public Choice, 105(1-2), 61-78. https://doi.org/10.1023/A:1005105822911.
- Slemrod, J. (2007). Cheating ourselves: the economics of tax evasion. Journal of Economic Perspectives, 21(1), 25-48. https://doi.org/10.1257/jep.21.1.25.
- Tanto, V. (2021). Tax Avoidance in Albania. European Journal of Economics and Business Studies, 6(3), 124-136. Available at: http://journals.euser.org/index.php/ejes/article/view/4926.
- Tarekegn, M. (2016). Taxpayers’ Perception on the Seriousness of Tax Evasion in Dessie Town Administration, Ethiopia. Research Journal of Finance and Accounting (Online), 7(19), 93. Available at: https://core.ac.uk/download/pdf/234631842.pdf.
- Torgler, B., & Schaltegger, C.A. (2006). Tax morale: a survey with a special focus on Switzerland. Swiss. Journal of Economics and Statistics, 142(3), 395-425. Available at: link.
- Torgler, B. (2007). Tax Compliance and Tax Morale: A Theoretical and Empirical Analysis, Cheltenham, UK: Edward Elgar, 2007. https://doi.org/10.4337/9781847207203.
- Torgler, B., Demir, I.C., Macintyre, A., & Schaffner, M. (2008). Causes and Consequences of Tax Morale: An Empirical Investigation. Economic Analysis and Policy, 38(2), 313-339. http://dx.doi.org/10.1016/S0313-5926(08)50023-3.
- Turner, J.C. (2005). Explaining the nature of power: A three-process theory. European Journal of Social Psychology, 35(1), 1-22. http://dx.doi.org/10.1002/ejsp.244.
- Wenzel, M. (2004). An analysis of norm processes in tax compliance. Journal of Economic Psychology, 25(2), 213-228. https://doi.org/10.1016/S0167-4870(02)00168-X.
- World Bank Report (2013). Enterprise Survey, Albania Country Profile. Available at: http://documents1.worldbank.org/curated/en/337391468003295834/pdf/922900WP0Box380PUBLIC00Albania02013.pdf.