[tormeh]

That's not really how it works. Tax rate and tax evasion aren't really linked. It's about culture and enforcement.

Anyway, if your business can't pay tax it should close and you should find something more profitable to do. I guess you can argue that some businesses of cultural or otherwise non-monetary worth should have some subsidies, but as long as the company goal is to "bring in the dough", then that's the dumbest excuse I've heard. On par with "just because".

[bad_user]

> Tax rate and tax evasion aren't really linked. It's about culture and enforcement

And how does that culture happen? Do you think people just get up one morning and decide to do tax evasion?

Of course they are linked - especially in countries in which the private sector is underrepresented and overwhelmed compared to the retired, the unemployed and the ones in the public sector, all of them assisted socially.

In a country in which 60-70% of a company's revenue goes to taxes, such that the government can deliver their electoral alms, it's not so much about bringing in the dough, but more about surviving for one more year with food on the table.

[tormeh]

>And how does that culture happen? Do you think people just get up one morning and decide to do tax evasion?

No, they get brought up by their parents to do it, usually. The justification is that the government will just waste it anyway, which can be true. Of course, the culture that breeds tax evasion is the same one that breeds poor government. Happily I don't have to deal with it.

[laurencerowe]

The correlation is almost the exact opposite: https://ideas.repec.org/p/ces/ceswps/_431.html

It's cultural, tax evasion is higher in countries which were recently dicatatorships (Spain, Portugal, Greece) or never developed a strong central government (Italy.)

[refurb]

Tax rate and tax evasion aren't really linked.

Do you have any sources that support that assertion? Increasing tax rates increase the incentive to avoid said taxes. If I'm going to go to jail for tax fraud, I'm not going to that if the rate is 2%, but I might if it's 50%.

[Someone]

I don't have sources, but I do think it depends a lot on culture. For example, in Europe (WARNING: sweeping generalizations ahead) the northern countries do not have lower taxation rates than the southern ones, but shadow economies are smaller.

Part of that is that many people in the north consider a welfare state (http://en.m.wikipedia.org/wiki/Welfare_state) worth paying higher taxes for. "I'm a happy taxpayer" is not an unheard of statement, and said without a grain of irony.

Another part is that it is harder to evade taxes in a culture where people are more honest. If the typical accountant complains if you have money you cannot account for, and cannot be bribed, it is more of a hassle to find one that complies with you (conversely, if your accountant suggests ways to evade taxes, more people will be inclined to do it)

Historically, many consider that culture to be the result of Protestantism. Many Protestants consider democratic government to be the will of god (http://en.m.wikipedia.org/wiki/Protestant_culture#Government). That makes any form of revolt against government a sin.