The Ethics of Tax Evasion: A Comparative Study of Chinese and U.S. Opinions

Abstract

Tax evasion is defined as the illegal nonpayment of a tax. Various arguments have been made over the centuries to justify tax evasion. Historically, the strongest arguments to justify tax evasion have been in cases where the people perceive the tax system to be unfair, where the government is corrupt, where tax rates are too high, where there is inability to pay, where a large portion of the funds collected are wasted or wind up in the pockets of corrupt politicians or their friends or family, where the funds are spent on projects the taxpayer morally disapproves of, or where the taxpayers perceive that they are not getting much in return for their tax payments. There has also been a perception that tax evasion is acceptable if everyone else is doing it or if the probability of getting caught is low.

Historically, the weakest arguments have been in cases where the government works for the benefit of the people, where the money is being spent wisely, where the government is not corrupt, where the system is perceived as being fair, and where the people are receiving good benefits in exchange for their tax payments.

The present study examined and summarized the main arguments and incorporated them into a survey instrument that was distributed to 200 university students in China and 161 in the United States to determine the relative strengths of 18 historical arguments that have been used to justify tax evasion in the past. The arguments are ranked from strongest to weakest. Comparisons are also made between Chinese and U.S. opinion. A comparison of rankings and mean scores found that, overall, the Chinese were significantly more opposed to tax evasion in 10 cases and significantly less opposed to tax evasion in two cases. Chinese women were more opposed to tax evasion than were Chinese men in all 18 cases; the opposition was significantly stronger in 10 cases. For the US sample, men were significantly more opposed to tax evasion than women in one case; for the other 17 cases, the differences in mean scores were not significant.

Keywords: ethics, tax evasion, gender, student status, academic major, public finance, China, United States

JEL Classification: H26, J1, K34, M4