2. Tax morale in businesses

This chapter focuses on tax morale in businesses, where there is limited existing research, especially in relation to developing countries. The chapter uses new data on tax certainty as a proxy for tax morale, to identify some of the factors likely to influence MNEs, and possible policy responses.  In addition, in recognition of the limitations of tax certainty as a proxy, further research opportunities are identified including assessing the role of voluntary tax and business principles on MNE tax morale.

    

There has been significant attention focussed on the taxation of businesses in recent years. This focus has primarily been on the (often complex) practices of MNEs and the international rules regulating them (most notably the BEPS issues1), or the nature of tax competition between states, which is seen to reduce corporate income tax rates across the world. This has left relatively little room for discussion of tax morale and often diminished it to a simple relationship with tax rates.

Focus on the taxation of business has been complemented more recently, with the G20’s attention on tax certainty. The tax certainty agenda seeks to increase the predictability of the tax environment to encourage investment. As such, the tax certainty agenda and the tax morale agenda are closely intertwined. Both are concerned with the factors that determine the willingness for businesses to voluntarily take part in the tax system.

This chapter uses new data to help fill the research gap on business tax morale. There is relatively little research and data on business tax morale currently available (Sections 2.1 and 2.2 below summarise the existing research). A recent OECD tax certainty survey of MNEs (OECD/IMF, 2018[1]) provides a useful proxy to open the debate on business tax morale in developing countries. Simply put, when MNE’s perceive low tax certainty they may be less likely to participate actively or positively in the tax system (or at least the parts that are most uncertain). As tax certainty is only a proxy of tax morale, it presents some limitations, thus while the conclusions derived from the analysis point to some policy implications, further research is needed.

Several opportunities to increase tax morale of businesses, and so improve the investment climate are identified for governments in developing countries. These cover both the technical (e.g. refund processes for VAT) and the relational (e.g. the relationship between the taxpayers and tax authorities). While many of the factors may not be surprising, observing how priorities differ between regions is instructive in terms of showing how variable the causes of low tax morale can be, further emphasising the need for tailored country- or regional-level approaches.

2.1. Why is business tax morale important?

The impact of low tax morale in business is not confined simply to tax revenues, but also encompasses the level or type of investment and other spillover impacts. For instance, as in the case of individuals, low tax morale in businesses can result in tax avoidance, but it may also result in firms exiting the market. Since firms also act as withholding agents (e.g. for VAT and employees’ income tax), low tax morale may therefore affect their willingness to withhold and remit taxes to governments, in addition to their own tax payments. The mechanisms through which these effects may happen will vary between SMEs and MNEs.

Small firms can declare fewer sales, reduce investments or move into the informal market. Research using the World Bank Enterprise Survey highlights how levels of informality vary strongly across regions (Figure 2.1)2. In Latin America and the Caribbean and in Sub-Saharan Africa, more than 60% of firms report unfair competition with informal firms, while in Europe and Central Asia the number is below 40%. The effects of informality go beyond tax collection, as informal firms tend to be less productive, generate fewer quality jobs and provide fewer benefits (such as access to social security) for employees. While low tax morale is not the sole cause of informality among small firms, measuring and understanding tax morale in SMEs provides an avenue for addressing the high rates of informality, alongside other methods such as reducing bureaucracy and the costs of formalisation (see Box 2.1).

Figure 2.1. Percentage of firms competing against unregistered or informal firms

Source: Enterprise Surveys (http://www.enterprisesurveys.org/data/exploretopics/informality), The World Bank.

MNEs may seek incentives to compensate for lack of trust in parts of the tax system. As a result of having more political and economic power, MNEs have multiple approaches (of varying degrees of legitimacy) to reduce tax payments, including the possibility to secure tax exemptions. For example, a lack of confidence in VAT systems in Africa is reported to motivate MNE demands for tax incentives (Moore, Prichard and Fjeldstad, 2018, p. 128[2]). As an extreme option, MNEs can exit the market (or choose not to enter) and/or change their investment behaviour. However, repeated surveys have identified tax as not generally being one of the main factors driving investment decisions (World Bank Group, 2018[3]; Platform For Collaboration on Tax, 2015[4]; James, 2009[5]; Hornberger and Kusek, 2011[6]).

2.2. Existing research

There has been relatively limited research on business tax morale, especially in developing countries. Tax morale in businesses has both similarities and differences to tax morale among individuals. As decisions in firms are made by individuals, some of the factors influencing those individuals may spill over into firms, especially for small firms. Factors include corruption, cultural norms and values (Joulfaian, 2009[37]; Alm and McClellan, 2012[38]). Other factors determined by the firm’s corporate behaviour might also affect their tax morale. These include risk preferences, approach of tax advisors, board reputation, company structure, size of the firm, compliance cost, and tax complexity (Yucedogru, 2013[36]; Lanis et al., 2018[39]). There is limited research into the impact of these various factors, though it is gradually increasing; currently USAID is undertaking a study to explore the influence of tax advisors on Serbian businesses (OECD, 2019[8]), while the OECD is exploring perceptions of tax officials on the role of the Big Four (KPMG, EY, Deloitte and PwC – the four biggest professional services networks globally).

Table 2.1 summarises some of the main findings of existing research. These include differences between large and small firms, as well as between domestic and foreign enterprises (where the results are mixed). Other findings identify the role of the tax administration, the legitimacy of the state, and even the role of religion and patriotism (Yucedogru, 2013[9]).

Box 2.1. Reducing informality and building tax morale, the CabDost experience

CabDost is a tech-based social enterprise working with taxi drivers in India (primarily Bangalore and Hyderabad). It aims to encourage financial inclusion, through helping file tax returns and facilitating formalisation to enable better financial planning.

Through several innovative and free tax filing campaigns, CabDost has worked with more than 9 000 taxi drivers, building awareness of the importance of tax filing and leading to approximately 14 000 tax returns being filed.

CabDost has achieved this success through a range of approaches:

• An association with Radio City 91.1 enabling targeted broadcasts.

• Setting up help desks at the offices of taxi apps OLA and Uber.

• Hosting the first of its kind financial inclusion drive in Kempegowda Bangalore International Airport and RGIA Airport, Hyderabad, India.

• Working with car manufacturing companies to support the campaigns through brand integration.

• Launching a pioneering tech product through which the drivers could register on a multilingual platform, as opposed to English being used as a default language.

Importantly, CabDost has pitched their work as a broad financial literacy programme, rather than a narrow tax programme. This scope has enabled the company to discuss the benefits of formalisation, as well as the tax obligations. CabDost is now looking to extend its approach and to reduce the fear of taxation in other sectors.

Source: Yamuna Sastry and Muhammed Shafeeque (Founding team, CabDost).

Tax morale in businesses has both similarities and differences to tax morale among individuals. As decisions in firms are made by individuals, some of the factors influencing those individuals may spill over into firms, especially for small firms. Factors include corruption, cultural norms and values (Joulfaian, 2009[7]; Alm and McClellan, 2012[8]). Other factors determined by the firm’s corporate behaviour might also affect their tax morale. These include risk preferences, approach of tax advisors, board reputation, company structure, size of the firm, compliance cost, and tax complexity (Yucedogru, 2013[9]; Lanis et al., 2018[10]). There is limited research into the impact of these various factors, though it is gradually increasing; currently USAID is undertaking a study to explore the influence of tax advisors on Serbian businesses (OECD, 2019[11]),3 while the OECD is exploring perceptions of tax officials on the role of the Big Four (KPMG, EY, Deloitte and PwC – the four biggest professional services networks globally).

Table 2.1. Summary of research on business tax morale
	Year	Findings:	Methods
Alm and McClellan	2012	Domestic firms evade more and report less than foreign- and state-owned firms. Policies should: Reduce corruption Improve taxpayer services Simplify the tax paying process	Regression analysis. Dataset includes data from 34 countries and over 8,000 firms.
Everest-Phillips and Sandall	2009	Integral factors to any tax system: State legitimacy Taxpayers’ willingness to pay Effectiveness of tax administration	Discussion note
Joulfaian	2009	-Business non-compliance rises with the rate of tax related bribes. -Foreign firms conceal fewer of their activities than domestic firms.	Multivariate regression analysis. Dataset includes 26 transition economies
Mickiewicz et. al	2017	Higher tax morale in firms is associated with: Legitimacy of tax authorities and the government Feeling of belonging to the nation Perceptions of the risk and severity of punishment	Regression analysis. Survey data on business owners/managers in Latvia
OECD	2004	-Large business might have political power to gain favourable tax schemes and have access to sophisticated tax strategies -SMEs can choose to become informal or evade taxes	Guidance note on tax compliance risk
Yucedogru	2013	-Perception of government and religion affect tax morale -Patriotism and tax complexity are not effectively influencing SMEs tax morale	Qualitative data from 20 SMEs in Turkey.

Given these differences the definition of tax morale may need to be interpreted differently with respect to businesses than for individuals. As noted in several of the consultation responses, especially for large companies, tax morale for businesses represents something different to the intrinsic motivation to pay taxes by an individual. While the motivations of individuals within (or advising) a company may play a role, the structure and processes of the company itself will further shape the company approach to tax (see Mulligan and Oats, (2016[12])). Several consultation responses suggested that a new nomenclature might be beneficial for the tax morale of businesses, perhaps focussing on responsible compliance, to make clearer the differences from individuals (OECD, 2019[11]). While a new definition might be useful in the longer term, this report refers to tax morale of businesses within the definitions generally used in existing research.

Estimates of tax morale among firms (as with individuals) vary across regions and countries, with emerging economies showing the lowest levels. There is no simple way to measure tax morale, so proxies are generally used. One commonly used method is the fraction of sales concealed from tax authorities4 (see Alm and McClelland (2012[8]) and Joulfaian (2009[7])). Using this measure, on average, OECD member economies present the highest levels of tax morale with less than 46% of formal firms (with five or more employees) not declaring all sales for tax purposes. In emerging regions, the figures are relatively higher, especially for Africa and LAC with almost 60% of firms not declaring all sales to reduce tax payment (Figure 2.2). An important caveat to this approach, however, is that the measure is a proxy for tax morale; other factors, most notably enforcement levels, are likely to impact on the results.

Figure 2.2. Firms that do not report all sales for tax purposes (% of firms)

Note: Latest year available, data availability between 2002-10.

Source: Enterprise Surveys (http://www.enterprisesurveys.org), The World Bank.

Lack of data remains the main challenge into deepening the analysis for business tax morale. Similar datasets to those used for individuals’ tax morale do not exist. The few empirical papers that have focussed on tax morale for business have used the EBRD and World Bank Business Environment and Enterprise Performance Survey (BEEPS), based on a question related to the percentage of total sales declared for tax purposes by a firm. Since 2014, however, the question is no longer included in the survey, limiting the options to continue analysing firms’ tax morale with this methodology. The rest of this chapter seeks to use a new data source to further the research on business tax morale. This focuses on MNEs, which are of particular importance in developing countries where they can be responsible for a significant share of the tax base, even a majority in some countries (e.g. Rwanda reported that 70% of its tax base comes from MNEs (ATAF, 2016[13]).

2.3. MNE tax morale – lessons from a survey on tax certainty

Given the current data limitations, tax certainty can be a useful proxy to measure tax morale among MNEs. As outlined in Section 2.2 there are a number of factors that may influence the tax morale of businesses. Tax certainty is one that has previously not been looked at significantly, but appears to offer potential as tax certainty is likely to contribute to the tax morale of MNEs (OECD, 2019[11]).5 Most obviously, tax certainty affects the ease of paying taxes and relationship with the tax authority - issues that were found, in Africa, to have a significant impact on tax morale of individuals. In addition, tax certainty is likely to influence a range of issues that shape how a business chooses to engage with the tax system of a country, for example in its choices around investment, approach to tax incentives, and tax planning strategy. This section will test for some of these links and the causes of tax uncertainty for MNEs, particularly in developing countries. The analysis is based on a unique data source, the 2016 OECD business survey that gathered views from senior staff from over 500 companies, almost all MNEs, providing views on tax certainty in 82 developing countries (see Annex B for methodology) (OECD/IMF, 2018[1]).

Tax uncertainty appears to have a greater impact on business decisions in developing countries than in OECD member countries. While tax may not be the primary factor affecting investment decisions, the survey does suggest that tax uncertainty can have an impact and that for developing countries the impact is more common than for OECD member countries. Figure 2.3 shows the frequency with which tax uncertainty affects business decisions; all three regions show a more frequent impact than in OECD member countries, and this is especially pronounced in LAC. This is most likely due to levels of tax uncertainty being higher in the emerging regions, and suggests that developing countries may have much to gain from addressing tax certainty/tax morale issues.

Figure 2.3. Frequency of tax uncertainty seriously affecting business decisions

Note: Responses to the question “How frequently has uncertainty in the tax system had a serious impact on business decisions?” Respondents were asked to use a scale from 5 to 1 where 5 indicated very frequently, 4 frequently, 3 sometimes, 2 very occasionally, and 1 never.

The question represented in this table was asked separately for each country selected by the respondents, each respondent could select a maximum of 4 countries.

* denotes significance at 5%, difference between the region and OECD.

Source: OECD business survey on taxation (2016).

Tax uncertainty has some significant impacts, including changing business structures, adding costs, or even reducing investment. Companies were asked in which ways tax uncertainty affected business. Figure 2.4 shows that tax uncertainty has a range of impacts on businesses. The most common impact is on structures, costs and scale of investment. Tax uncertainty may only rarely affect the decision to invest, but it may much more frequently affect the decision on the size, location and structure of investment.

Figure 2.4. Impact of tax uncertainty

Note: Results for the question ”In your experience, in which of the following ways has tax uncertainty affected business operations?”

* denotes significance at 5%, difference between the region and OECD

Source: OECD business survey on taxation (2016).

2.4. The sources of tax uncertainty

The sources of tax uncertainty vary across regions. Figure 2.5 shows the top ten sources of tax uncertainty across the three regions. While there is some variation (especially in comparison to OECD member countries), there are also some commonalities.

International taxation issues are a source of tax uncertainty in all regions. There are several international tax issues in the top ten sources of tax uncertainty, highlighting the importance of this area for MNEs. The concerns cover inconsistency with international standards, lack of expertise in the tax administration, and a lack of understanding of the business structures of MNEs. This finding demonstrates a key benefit for developing countries in adopting international standards in tax, such as the BEPS Actions, in addition to highlighting the need for effective capacity building in implementing such standards. The experience of the Tax Inspectors Without Borders (TIWB) programme in Liberia has shown that building the technical capacity of the Liberia Revenue Authority has led to improved relationships with MNEs, including a positive change in compliance6. The concerns over the lack of understanding of international business also emphasise the potential benefits of engaging businesses themselves in capacity building to help explain how business structures and value chains are organised. This is an area where the OECD has made important progress, with the potential to do much more (Box 2.2), though careful attention is needed to avoid conflicts of interest.

Figure 2.5. Top ten sources of tax uncertainty for firms

Note: Results for the question “Please identify in your experience how important each of the below factors has been in increasing the overall uncertainty on tax issues in the countries you have selected?” The respondents could choose from a scale from 5 to 1, where 5 is extremely important and a lower number indicates the factor is progressively less important. The question represented in this table was asked separately for each country selected by the respondents, each respondent could select a maximum of 4 countries.

* denotes significance at 5%, difference between the region and OECD

Source: OECD business survey on taxation (2016).

Box 2.2. Harnessing business and industry expertise

Experience-sharing and insights from business can help tax authorities better understand common industry practices and alert them to tax base erosion risks. Products such as the Platform for Collaboration on Tax toolkits have been developed using information received through consultation with the business sector. Thanks to these toolkits, several developing countries have acquired increased understanding of their taxpayers’ industries, building a more collaborative relationship with business.

It is also possible to involve business in country-level and multilateral capacity building. Examples include:

• Unilever provided its industry experts to train Zimbabwe Revenue Authority officials on the value chain for consumer goods.

• Industry experts are increasingly used as complements to TIWB audit related technical capacity building programmes. For example, a TIWB Botswana programme benefitted from the supplementary skills of a diamond industry expert to help navigate the complexity of rough diamond trading and local value adding (e.g. polishing). Other examples include a floriculture expert in Ethiopia, and oil and gas experts in Nigeria.

• As part of a multilateral training programme on transfer pricing and mining in the Republic of Korea, country participants visited Posco Steelworks to gain practical insight into how mineral products (particularly iron ore) are used in steelmaking.

The relationship between tax authorities and businesses is at the heart of most sources of tax uncertainty. The majority of the highest-scored issues centre on the consistency of treatment or being able to secure certain results (reliefs/refunds/rulings). Addressing these issues may yield significant results in terms of an improved investment climate by enhancing tax morale of MNEs in developing countries.

The findings from the OECD business survey on the sources of tax uncertainty are consistent with findings elsewhere. The World Bank Group’s Doing Business Indicators (DBI) contain several indicators on taxation and provide an alternative data source to test the consistency of the findings from the OECD’s tax certainty survey. For example, Figure 2.6 shows the data for VAT refunds, which correlates with the tax certainty survey results. VAT refunds are identified as a far greater source of tax uncertainty in all three regions than the OECD member countries, with Africa reporting the greatest uncertainty. The data from the DBI shows that the time taken to comply with and obtain VAT refunds is highest in Africa and significantly higher in all three regions than the OECD average.

Figure 2.6. Time to comply with and obtain VAT refunds

Source: World Bank Group, Doing Business Indicators.

2.5. Tools to foster tax certainty and possible lessons for tax morale

Reducing bureaucracy, improving consultation and transparency, and providing more effective dispute resolution are identified as the most important tools to build tax certainty. The survey asked which tools would be useful to improve tax certainty, with the top 10 shown in Figure 2.7 below. Most of these tools address issues around improving trust in the tax system or making it easier to understand the tax system. In this respect, the results are consistent with changes recommended by World Bank Group and PricewaterhouseCoopers (PwC) for simple and coherent tax systems (World Bank Group and PwC, 2018[14]). There also appear to be similar challenges in building the tax morale of individuals. Whilst the processes would doubtlessly be different, reducing bureaucracy, improving consultation and transparency, and providing more effective dispute resolution are likely to have an impact on individuals’ tax morale as well as that of MNEs. Looking at such measures as part of a government-wide effort to improve tax morale for all taxpayers may therefore be beneficial. It could encourage exchange of ideas across wider networks and reduce the risk that tax certainty is only a concern for large corporations.

Figure 2.7. Top 10 tools to foster tax certainty

Note: Results for the question “Which of the following tools has enhanced or could enhance certainty in the tax system?” The respondents could choose from a scale from 5 to 1, where 5 is ‘has increased or could increase certainty substantially’, and lower numbers where the tool is progressively less important.

* denotes significance at 5%, difference between the region and OECD.

Source: OECD business survey on taxation (2016).

Significant variation between regions illustrates the need for a tailored approach to building tax morale. This illustrates again that while tax certainty/morale appears to be a global challenge, the responses need to be crafted to respond to the local environment. The priorities of developing countries are unlikely to be the same as in OECD member countries, although this may mean that OECD member countries have already addressed some of the challenges and can share experiences (e.g. through the FTA). The domestic capacities may also affect the policy choices. Many MNEs advocate co-operative compliance programmes which have been adopted by a number of OECD countries, yet these may be more challenging for developing countries, where limited capacities can create risks, for example in asymmetries in information and technical capacity (IMF/OECD, 2017[15]). Additional research will be needed, especially at the country level, to identify which policy choices and what level of openness and engagement with MNEs are likely to have the most impact.

Further research is needed including on the role of non-tax factors, on influencing the tax morale of businesses. This chapter has looked at one aspect of business tax morale, the role of tax certainty. There are however a number of other aspects that could be researched. The public consultation responses identified a number of these including; perceived fairness, business tax strategies and risk management, ease of compliance, role of key personnel within the business (OECD, 2019[11]). More work is also needed to understand how non-tax factors (e.g. service provision, levels of corruption, company structure etc.) may affect tax morale of businesses.

One area of increasing interest is the role and impact of principles of responsible tax conduct volunteered by MNEs in recent years. In an attempt to enhance dialogue and understanding with tax administrations, especially in developing countries, several business bodies have articulated voluntary best practice principles (see Box 2.3). If successful, such approaches could improve tax morale among businesses. Moreover, the assessment of such initiatives may have a wider impact if the largest companies are seen to be paying their taxes, with a positive knock-on effect on the tax morale of smaller companies and individuals. The OECD plans to work together with business to seek the views of developing country tax officials on the performance of business against the voluntary tax principles developed by business.

Box 2.3. Examples of voluntary tax principles developed by business

There are a number of voluntary tax principles, the most prominent are those from Business at OECD (BIAC) and the B Team. BIAC represents over 7 million companies of all sizes. In 2013, they produced a Statement of Tax Best Practices for Engaging with Tax Authorities in Developing Countries (BIAC, 2013[16]).

The B Team is a not-for-profit initiative formed by a global group of business leaders to catalyse a better way of doing business. In consultation with businesses and civil society, they developed a set of Responsible Tax Principles (The B Team, 2018[17])7 which 15 companies have endorsed thus far. Some companies have made public their self-assessment against these principles.

Both sets of principles cover a range of issues, including accountability and governance, compliance, relationships with tax authorities, approach to tax incentives, and transparency. These principles set out the guidelines that companies should apply. For example, regarding tax incentives, the BIAC Statement notes:

Business may utilise tax incentives that are transparent, publically published and endorsed by the host nation legislation.

Business should refrain from claiming or accepting exemptions not contemplated in the statutory, regulatory, or administrative framework related to taxation, financial incentives, or other issues.

The tax morale of SMEs also requires further research. This chapter has focussed on MNEs, as MNE taxpayers are of significant importance, especially in developing countries, but that is not to suggest the tax morale of SMEs is not important. SME’s represent the majority of firms in emerging economies and contribute to, on average, 45% of total employment and 33% of GDP (OECD, 2017b[18]). Many SME firms also move between formal and informal status, which has significant impacts not only on tax payments but access to social protection systems for employees. Given the differences between SME and MNEs different factors are likely to influence tax morale, and so dedicated SME focussed research will also be needed.

2.6. Policy considerations and further research

Increased business tax morale could lead to greater compliance. While tax morale is only rarely likely to be the determining factor for whether an investment occurs or not, it is prone to affect the scale and composition of investments. Building tax morale remains a challenging proposition, especially in developing countries, as understanding the determinants and drivers of business tax morale is not easy and research remains limited. By analysing survey responses on tax certainty, this report has identified some potential starting points for tax morale of MNEs:

• Increase capacity building on international taxation issues in tax administrations in developing countries to address inconsistencies in the application of international standards and build the experience of revenue authorities in this area. TIWB is especially valuable in the practical experience of applying international tax standards.

• Expand business engagement in capacity building for tax administrations in developing countries. While there are risks to involving business in capacity building, there are also potential gains through deeper explanations of how their structures, process and value chains work. In general, such capacity building can be delivered by non-tax staff from businesses, helping to manage potential conflicts of interest. Greater use of co-operative compliance approaches may also be useful in some countries, but such approaches also bring risks, especially in developing countries where capacity and safeguards are lower.

• Support the development of effective VAT and withholding tax systems. Much of the focus on MNE taxation is on corporation tax, but there are clearly significant issues with other taxes paid by MNEs. VAT is an area of special concern where a lack of effective refund systems can lead to demands for tax exemptions. The OECD International VAT/GST Guidelines and VAT Global Forum may offer starting points for an increased focus on these issues.

• Unlock the experiences of other tax administrations. There is significant variation between regions (and countries) on issues affecting tax morale among businesses. While this means priorities may be different, it also means some countries will have already addressed challenges faced elsewhere. Progress can therefore be made by regional tax organisations and the FTA to unlock and share their expertise and experience with others. This could include issues highlighted in this report such as reducing bureaucracy, improving consultation and transparency, and providing more effective dispute resolution.

• Look for synergies in building tax morale across the whole tax system. Issues around trust and transparency are common across businesses and individuals, suggesting tax morale should be addressed as a common challenge, sharing experience and insights across the system and not siloed through solely individual, corporate or even MNE taxation. In this respect, it may be useful to broaden the current focus on tax certainty on MNEs to the concept of tax morale.

• Develop country-level research to identify key issues affecting tax morale across different types of businesses (both size and sectors). As with tax morale of individuals, there is a need for deeper, country-level work to provide further insights, including to better understand the range of drivers of tax morale beyond tax certainty, and how tax morale interacts with other factors affecting compliance such as tax fairness. More detailed country level work is also vital to provide the granularity of evidence for detailed policy making.

• Undertake further research to understand the impact of other components of tax morale, e.g. voluntary principles. The OECD intends to work with BIAC to assess the impact of the BIAC principles in developing countries. The OECD will survey tax administrations, primarily in developing countries, to gather feedback.

Notes

← 1. Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately. BEPS practices cost countries USD 100-240 billion in lost revenue annually. Working together within OECD/G20 Inclusive Framework on BEPS, over 130 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.

← 2. See http://www.enterprisesurveys.org/data.

← 3. In 2019 USAID commenced a survey on SMEs that aims to identify factors that contribute to the erosion of SME tax compliance due to their accountants and factors that contribute to more compliant behaviour and attitudes of SMEs and their accountants. Results from the analysis will allow Serbian officials to implement policies that can help increase tax morale and tax compliance indirectly by influencing or nudging tax accountants.

← 4. Using data from the European Bank for Reconstruction and Development (EBRD)-World Bank Business Environment and Enterprise Survey.

← 5. This approach was endorsed by a number (though not all) of the consultation responses, especially those from the private sector.

← 6. Cited by Darlingston Talery, Commissioner Domestic Taxes, Liberia Revenue Authority (LRA) during his presentation at the Tax Morale conference on 25 January 2019. Improvements include enhanced dialogue between LRA and tax preparers and improvements in filing compliance. See also the presentation slides available at http://www.oecd.org/ctp/tax-global/presentations-of-the-conference-on-the-role-of-tax-morale-in-development-january-2019.pdf.

← 7. The principles in detail can be found in http://bteam.org/wp-content/uploads/2018/02/A-New-Bar-For-Responsible-Tax.pdf.

2. Tax morale in businesses