Impact of Institutional Environment Quality on Tax Evasion: A Comparative Investigation of Old Versus New EU Members

Yamen, A., Allam, A., Bani-Mustafa, A. and Uyar, A. 2018. Impact of Institutional Environment Quality on Tax Evasion: A Comparative Investigation of Old Versus New EU Members. Journal of International Accounting, Auditing and Taxation. 32, pp. 17-29. https://doi.org/10.1016/j.intaccaudtax.2018.07.001

TitleImpact of Institutional Environment Quality on Tax Evasion: A Comparative Investigation of Old Versus New EU Members
TypeJournal article
AuthorsYamen, A., Allam, A., Bani-Mustafa, A. and Uyar, A.
Abstract

This paper aims at comparatively investigating the impact of institutional environment quality (IEQ) on tax evasion in old (pre-2004) and new (post-2004) European Union (EU) member states. IEQ is measured by the World Bank's Worldwide Governance Indicators, which include voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. The size of shadow economy is used as a proxy for tax evasion. Using a linear mixed model to analyse the data, the results indicate a higher level of tax evasion in new member states compared to the old ones and reveal that tax evasion is decreasing in the old, albeit at a lower rate compared to the new EU members. Overall, there is evidence that the impact of IEQ on tax evasion is different between the two groups. While regulatory quality, voice and accountability, control of corruption, political stability and government effectiveness are significant determinants of tax evasion levels in older EU members, government effectiveness is the only significant factor in the new EU member states.

KeywordsTax evasion, Worldwide Governance Indicators, Institutional environment quality, EU, Linear mixed model
JournalJournal of International Accounting, Auditing and Taxation
Journal citation32, pp. 17-29
ISSN1061-9518
Year2018
PublisherElsevier
Accepted author manuscript
License
CC BY-NC-ND 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.intaccaudtax.2018.07.001
Publication dates
Published online27 Jul 2018
Published in printSep 2018

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