Session 1 - Corporate Tax Morale

This article introduces a novel theoretical framework for understanding the tax morale of corporate taxpayers, identifying five endogenous and six exogenous motivations for tax (non-) compliance. It addresses for the first time a crucial question, namely why is compliance with tax law among small businesses so low, particularly in developing countries. It empirically demonstrates that SMEs’ tax behaviour is influenced by psychological factors, identifying a corporate tax morale that prima facie runs counter to both the legal fiction that holds SMEs as separate entities, and the standard tax policy assumption that VAT is a fully neutral tax for businesses.