National culture and tax evasion: The role of the institutional environment quality

Allam, A., Moussa, T., Abdelhady, M. and Yamen, A. 2023. National culture and tax evasion: The role of the institutional environment quality. Journal of International Accounting, Auditing and Taxation. 52 100559. https://doi.org/10.1016/j.intaccaudtax.2023.100559

TitleNational culture and tax evasion: The role of the institutional environment quality
TypeJournal article
AuthorsAllam, A., Moussa, T., Abdelhady, M. and Yamen, A.
Abstract

This study examines the role of institutional environment quality (IEQ) in the relationship between national culture (NC) and tax evasion (TE). Prior research examined the direct impact of culture on tax evasion but did not examine potential mechanisms that may influence this relationship. Using structural equation modeling and examining data for the European Union (EU) countries over the 2004-2018 period, we find that countries that exhibit high levels of power distance, uncertainty avoidance, collectivism, and restraint are associated with higher levels of tax evasion. The results indicate that IEQ has a mediating effect on the NC–TE nexus, suggesting that policymakers should aim at improving the quality of national institutions to diminish the undesirable influence of culture on tax evasion levels. More specifically, we find that the rule of law, regulatory quality, and government effectiveness are the IEQ indicators that fully mediate the NC-TE relationship. Moreover, splitting the sample into older and newer EU countries shows a partial mediation effect in older EU countries and a full mediation effect in newer EU countries. Enhancing IEQ can play a more prominent role in newer EU countries to reduce the detrimental impact of cultural values on tax evasion.

KeywordsTax evasion
National culture
Institutional environment quality
Structural equation modeling
European Union
Article number100559
JournalJournal of International Accounting, Auditing and Taxation
Journal citation52
ISSN1061-9518
Year2023
PublisherElsevier
Publisher's version
License
CC BY 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.intaccaudtax.2023.100559
Publication dates
Published online28 Jun 2023

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