The FINANCIAL - Tax morale is increasing but not everywhere

Tax morale is increasing but not everywhere

The FINANCIAL -- Tax evasion in modern Georgia is as old as the practice of collecting taxes itself. They emerged simultaneously in both criminal code and in the minds of regular citizens less than 25 years ago, when we, together with 14 other contingent republics of the Soviet Union gave up building communism and embraced the market economy. However, the opposite is true when it comes to accepting or giving bribes – they are as old as a human kind.

In this column I present time series data from the World Values Survey (WVS) on taxes and bribing across 3 post Soviet countries. The survey asked the general public whether evading taxes and accepting bribes is always or never justified.

During Soviet times, commercial entrepreneurship was simply nonexistent. Aside from some kitchen gardens, the state directed everything and regular citizens did not have to pay taxes, at least not directly.  But with the demise of command economy came new rules and any cheating on taxes became punishable by the state. The quality of governance as well as economic progress became strongly dependent on tax collection, regardless of the amount of oil or other “free gifts” that Mother Nature provided. In parallel, civic society started emerging and so did its morality, a process still in its early stages of development.

In 1995 more than half of Georgians (52%) thought that tax evasion could never be justified and this figure was significantly lower in Ukraine and Russia, 37% and 43% respectively. Twenty years on, Georgia has strongly improved its “civic morale” and now a large majority (78%) of the public considers such behavior as unjustifiable. In Russia, things have seemingly not changed much, whereas Ukraine has achieved some progress: a few months ago when the data collection was administered, almost half of Ukrainians (48%) believed that avoiding taxes could not be justified. Russian data shows no improvement in this regard.

Table 1. Evading taxes is never justified (figures are given in percentages)


Taking bribes and giving cash to officials is historically quite common and very few countries have figured out ways of effectively root out such practices. Georgia has certainly made significant progress over the last 15 years and alas, the same cannot be said about many other ex “comrade” republics.

If twenty years ago (during Edward Shevardnadeze’s presidency) 72% of Georgians were thinking that “someone accepting a bribe in the course of their duties” is not at all justifiable, this figure reached 88% in 2014. At the same time, corruption has dramatically decreased in the country and perhaps the only way for those who are still nostalgic for paying small bribes to government officials or want to do this for fun is to cross the Georgian boarder (in any direction!) where he/she can still enjoy this practice.

In 1995 – when building a true market economy and democracy in Russia still had promise - four out of five (79%) surveyed citizens thought that accepting bribes can never be justifiable. Boris Yelstin’s failed reforms and the reconsolidation of state control over much of the economy has apparently not helped to improve such sentiment. Today, the figure has melted and now only 60% of adult Russians share the same views.

In this regard, things have been more “stable” in Ukraine, which has experienced smaller fluctuation over the past 20 years. Sixty percent of the public believes that accepting bribes is not justified, 8 percentage points lower than in 1995.

Table 2. Someone accepting a bribe in the course of his/her duties is never justified (figures are given in percentages)



Theory says that populations with low unemployment rates strongly disapprove of dishonesty and cheating. Compared to Russia or Ukraine, Georgia has certainly seen declining unemployment rates; those on pensions or employed have had lower wages and incomes then it big neighboring countries. Low level of corruption in Georgia is not necessarily due to these figures, but rather successful reforms and more importantly maintaining clean institutions across governments.  Russia and Ukraine both have similar challenges to overcome, but looking back at history, it is clear that both do not have equal chances of success. This is one situation when I wish I was wrong.     

Bottom line is that in this part of the world nothing can be said to be certain, except death and when it comes to taxes, we can still argue whether to put them next to death.

GORBI is a regional hub for partner organizations and international clients. GORBI is an exclusive member of Gallup International research network since 2003 and has over two decades of experience in survey research in the former Soviet Union, as well as Mongolia and Iraq.

 

Author: Merab Pachulia, GORBI


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