Tax Evasion Literature Review

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CHAPTER 2: LITERATURE REVIEW "Fear is the tax that conscience pays to guilt." 2.1 Definition of Taxation Taxes are levied in almost every part of the world. Since this dissertation is based solely on tax, a definition of tax seems important. According to the Concise Oxford Dictionary, the word ‘tax’ is defined as “A compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.” On the other hand, the OECD classified the term ‘tax’ as “a compulsory, unrequited payments to general government.” In fact, tax is the proportion of money deducted from the remuneration of taxpayers enabling the government to finance the public expenditures…show more content…
Therefore, Chiumya (2006) elaborated on the following causes of tax evasion. Evasion is often caused by high and more distortionary tax rates. Therefore, taxpayers prefer to have recourse to the activities in the underground economy, engage in clandestine activities and hence, affecting the economic growth of the country (Andreoni et al. 1998; Slemrod 2004; Johnson et al. 2000). Dabla-Norris and Feltenstein (2005) found in their study that there exist a strong and negative relationship between the financial development that is how much people know about taxation and the size of the shadow economy. Consequently, governments face a short-fall in revenue; therefore they reduce the supply of public services and borrow more which leads to a BOP deficit. Accordingly, businesses and entrepreneurs are less motivated to operate in the aboveground sector of the…show more content…
Therefore, Torgler and Schaltegger (2006) confirmed that age play a vital role when it comes to the concept of tax evasion. They concluded that as the taxpayer becomes older, he/she will become more conscious of his duty of paying taxes more often. Additionally, the study on tax compliance by Torgler and Schneider (2004) indicates that females in most cases are more compliant compared to males and they also found that married people tend to have greater tax morale than

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