Is the level of taxation a product of culture? A cultural economics approach

Abstract

The role played by the state is one of the most important problems facing economic science. Apart from its role as welfare provider, the state is inevitably confronted by the shared cultural values of its citizens. This paper evaluates the role of culture in explaining the differences in the tax revenues as percentage of GDP on a cross-sectional dataset from 41 countries. The results suggest that the association between shared cultural values, on the one side, and tax revenues as a percentage of GDP, on the other side, proves to be statistically significant. Our results indicate that it is important to take culture into account when designing optimal economic policies and planning the increase of tax revenues.

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