Keywords

1 Introduction

The primary task of a fiscal authority is to collect taxes due to the government at the lowest possible cost (Ionescu, 2001). Governments need money. Modern governments need lots of money (Steinmo, 1993, p. 1). As such, in the current period, for Romania, encouraging voluntary compliance of taxpayers could be one of the solutions to the increase of budgetary revenue needed to meet the growing needs of a modern society .

The modern citizen must learn to harmonize the needs of society with personal needs. It must act in such a way that the inevitable relations established between it and all the institutions forming the state administration (the state in its entirety) to be mutually beneficial. What we need is an education for collective living rather than for individual success (Goodwin, 2001, p. 41). From this point of view, the tax is the most used form in which the citizen contributes to the satisfaction of the general needs of the society, giving up part of its income or wealth. At an individual level, a comparison between what the taxpayer provides and what it receives from the state through redistribution can almost never lead to just conclusions, because participation in state resources is mutual, and the state will primarily satisfy the general needs of society, and not those of each individual. Thus, we realise that taxation cannot be separated from social solidarity, in this tandem it always prevails the satisfaction of collective needs.

Social responsibility is an ethical framework and suggests that an entity, be it an organization or individual, has an obligation to act for the benefit of society at large. Social responsibility is a duty every individual has to perform so as to maintain a balance between individual needs of citizens and those of society as a whole (Emerson, 2003; Palmer, 1995; Preston & O’Bannon, 1997).

From this perspective, voluntary compliance with tax payment is a form of social responsibility. Failure to pay taxes also leads to the impossibility of supporting governmental programs absolutely indispensable (e.g. education, health , etc.). Non-payment or payment in a smaller amount than the real one is considered to be a socially irresponsible behaviour (Cârstea & Dascălu, 2013).

Voluntary compliance is the most efficient and easiest way to collect tax revenue, being the process by which natural and legal taxpayers declare and pay, on their own initiative (without applying coercive measures), in full and in time, taxes, contributions and duties due under current tax legislation.

Increasing the degree of voluntary tax compliance and, implicitly, social responsibility of taxpayers is one of the major objectives of each tax system. Modern tax administrations are aware that encouraging and inducing social responsibility behaviour among taxpayers encourages compliance and reduces social costs (Fig. 1). However, in order to implement the objective, it is necessary to have a profound knowledge of the mechanisms that generate this desideratum.

Fig. 1
figure 1

A model of compliance in accordance with social responsibility

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In this respect, a real analysis of the factors contributing to the adoption and consolidation of social responsibility as a desirable attitude towards tax liability is essential.

There is a vast literature on the subject. The pioneering in the analysis of factors influencing tax compliance can be attributed to Günter Schmölders (1959) who introduced in the late 1950s ‘fiscal psychology’ as a new branch of public finances. Schmölders proposed as an object of study the ‘tax mentality’ of individuals, which is consistent on the broader ‘tax mentality’ of their nation, profession, or social class. However, there has been a lack of consensus and agreement as to why people do or do not pay their taxes. Several studies have been dedicated to the analysis of tax compliance’ determinants as they are of paramount importance for tax levying, public spending, and providing public goods. Allingham and Sandmo (1972), Srinivasan (1973), Yitzhaki (1974), and later on Erard and Feinstein (1994), Slemrod, Blumenthal, and Christian (2001), or Anderhub, Giese, Güth, Hoffmann, and Otto (2001) focus on the influence of economic factors (tax rate, audit rate, income, penalty) on compliance behaviour.

More recently, another few tax compliance studies (Murphy, 2004; Tan, 1998; Hite, 1997; Torgler & Murphy, 2004; etc.) have been based on social and psychological theories. Research studies in this field have argued that the human element plays a vital role in individual taxpayer compliance decisions.

According to Fischer, Wartick, and Mark (1992), tax compliance is mainly influence by four groups of factors (Fischer Model). These groups of factors are: (1) demographic (e.g. age, gender and education); (2) non-compliance opportunity (e.g. income level, income source and occupation); (3) attitudes and perceptions (e.g. fairness of the tax system and peer influence) and (4) tax system/structure (e.g. complexity of the tax system, probability of detection and penalties and tax rates).

The Fischer model provides a framework for understanding the influence of those socio-economic and psychological components on taxpayers’ compliance decision. Later, Chau and Leung (2009) suggest a partial refinement to this model by incorporating another important environmental factor: culture .

According to other tax specialists such as Loo (2006), Kirchler (2007), Palil (2010), the main factors who affecting tax compliance were grouped into five main categories. These are: (1) economic factors (tax rates, tax audits and perceptions of government spending); (2) institutional factors (the role of the tax authority, simplicity of the tax returns and administration and probability of detection); (3) social factors (ethics and attitude, perceptions of equity and fairness, political affiliation and changes on current government policy , referent groups); (4) individual factors (personal financial constraints, awareness of offences and penalties) and (5) other factors (age, income, level, culture , education, gender).

To better understand the voluntary compliance, Beers, LoPresti, and San Juan (2012) identifies a number of factors who which influences the decision to pay taxes. These factors are summarized in Table 1:

Table 1 Factors identified as potentially voluntary compliance
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2 Factors That Influence Voluntary Tax Compliance: A Romanian Perspective

In Romania, the degree of voluntary compliance is small. According to ‘Country Report Romania 2017—European Commission Working Document’, our country is characterized by ‘high tax evasion and low tax compliance’. The recommendation of the European Commission for Romania is to improve the degree of voluntary compliance with taxes payment. For example, Romania was in 2015 the European state with the largest VAT gap (the ratio between VAT due and unpaid to the budget and the total VAT payment obligation). According to the ‘Study and Reports on the VAT Gap in the EU-28 Member States: Final Report’ (2017), the largest Gaps were registered in Romania (37.18%), Slovakia (29.39%), and Greece (28.27%). The smallest Gaps were observed in Sweden (−1.42%), Spain (3.52%), and Croatia (3.92%).

Valorically, the degree of voluntary compliance with the tax payment is determined as a ratio between current receivables and declared amounts for the reporting period.

According to ‘The Performance Report of ANAF’ (2015, 2016), the degree of voluntary payment compliance was of 83.67% in 2014, 83.53% in 2015 and 84.0% in 2016, and voluntary declaration compliance was of 94.1% in 2014, 94.8% in 2015 and 95.3% in 2016.

Coherent voluntary compliance programs have been implemented over the past years in most EU Member States, including Central and Eastern European countries such as Poland, Hungary, the Czech Republic, Slovakia or Slovenia. In many cases, these initiatives provide for the total or partial cancellation of penalties due by taxpayers and the forgiveness of criminal charges. Also, according to the information of the Organization for Economic Cooperation and Development, 23 other non-EU countries have introduced voluntary compliance programs, such as the United States, Canada, Japan, Switzerland or Australia. In this context, it would be desirable for Romania also to consider developing and implementing a coherent voluntary compliance program that encourages taxpayers to declare transparently and to pay due taxes, duties and contributions.

Following the example of the Foreign Account Tax Compliance Act (FATCA) implemented by the United States for its residents, more and more states have shown interest in being a party to a similar agreement to automatically exchange information about their residents’ income. Thus, it emerged from the Organization for Economic Cooperation and Development (OECD) initiative in 1988, The Convention on Mutual Administrative Assistance in Tax Matters, signed in 2014 also by Romania. The Convention is the most comprehensive multilateral instrument available for all forms of tax cooperation to combat tax evasion and avoidance.

An important first step for Romania in determining and encouraging voluntary compliance was the adoption of the Common Reporting Standard (CRS), an initiative of the OECD to apply the automatic exchange of information in the field of taxation. Common Reporting Standard was implemented within the European Union through Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC2). These legal provisions envisaged the transparency of the tax and duties collection procedure and fraud reduction and cross-border tax evasion by removing situations where there could be unduly unreported income, which would lead to the objective impossibility of the State entitled to apply duties and taxes deductions to do so. Starting with 2016, with the entry into force of the new Fiscal Procedure Code (Law 207/2015), it has also been transposed at national level the Council Directive 2014/107/EU as regards mandatory automatic exchange of information in the field of taxation.

Also, the transposition in the national legislation of the Council Directive (EU) 2016/881 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (DAC4), is another important step for voluntary compliance of taxpayers. Emergency Ordinance no. 42/2017 is the legislative act that facilitated this approach.

DAC 4 is the EU equivalent of Country-by-Country reporting and provides for the mandatory automatic exchange between EU Member States of the Country-by-Country report of a Multinational Enterprise (MNE). Country-by-Country reporting requires MNE’s to submit a Country-by-Country Report of certain financial information (including the revenues, profits, taxes paid and accrued, accumulated earnings, number of employees and certain assets broken down by each tax jurisdiction in which the MNE operates) and this information is subsequently exchanged to any other Member State in which, on the basis of the information in the Country-by-Country report, one or more Constituent Entities of the MNE Group of the Reporting Entity are either resident for tax purposes or subject to tax with respect to the business carried out through a permanent establishment.

At the level of individual taxpayers, the General Directorate of Natural Persons’ Income Control (up to 2015, Tax Inspection Directorate) is the structure of the National Agency for Fiscal Administration designated to implement the Tax Compliance Program for Natural Persons with great fortune (PFAM). Having a legal framework dedicated to checking natural persons that has been permanently completed, the work of the Directorate is focused on a target group of more than 300 people in the high income and great fortune category. Currently the information sources of the Directorate are given by: banks, National Trade Register Office (ONRC), local administrative departments, other public authorities (e.g. those regarding real estate holdings, car registrations, ship and aircraft register, etc.), annual financial statements of companies (submitted or on request) based on tax returns and informative declarations submitted by taxpayers (natural and legal persons). In addition, information received from abroad is analysed either based on automatic exchange or based on the exchange of information on request. In the verification activity there are mainly analysed the loans granted to the companies by the shareholders, other allocations of funds made by the verified person, in this case purchases of movable and immovable goods, deposits in bank accounts, securities acquisitions, etc., hidden dividends, income from abroad compared to declared earnings. The stated objective of the Directorate is to increase the degree of voluntary compliance among those included in PFAM.

According to the authors Kirchler, Hoelzl, and Wahl (2008), the quality of compliance is different depending on the key issues: taxpayers’ confidence in state authorities and the power of authorities. On the one hand, trust is a voluntary compliance predictor, which is obtained without constraint, based on the willingness of taxpayers to act in the interest of others and to make their duty as citizens in response to the credibility of the authorities. On the other hand, power is a predictor of enforced compliance that is achieved through constraining strategies (tax control, fines) used by tax authorities against taxpayers’ aversion to risk and fines. According to the literature, compliance behaviour refers to both respecting the letter and the spirit of the law (James & Alley, 2002).

Tax authorities have at their disposal a wide range of strategies, from facilitating and assisting compliance, applicable to honest taxpayers, to the full use of law enforcement applicable to fraudsters.

Voluntary tax compliance is a syntagm that, although non-existent in Romanian tax legislation, is still more and more among the declarative objectives set out in the strategies of the National Agency for Tax Administration in recent years.

Starting from the stated need of the authorities to increase the degree of voluntary compliance on meeting the fiscal obligations by taxpayers, we will try to analyse the main factors of compliance from the perspective of Romanian realities.

2.1 Deterrence and Threats

Discouragement is one of the factors with an important role in the taxpayer-taxation relationship . According to Weber (1992), the state holds the ‘monopoly of legitimate violence’ and can impose its will in front of its citizens. Fiscal punishment has a millenary history closely linked to tax. Its establishment was based on the assumption that some members of society will not comply with social norms unless they personally feel the effects of punishments that are intended to correct them. Every kind of society has built its own punitive justice in the tax area and institutionalized the punishment. The perhaps most obvious way to ensure tax compliance is to criminalize non-compliance (Brockmann, Philipp, & Seelkopf, 2016, p. 4). The antagonist climate is characterized by lack of confidence and is managed through the ‘enforcement paradigm’ (Alm & Torgler, 2011), in other words, it is trying to eliminate tax fraud through frequent tax checks and drastic sanctions. By applying punishments to economic actors or other categories the State has a double purpose: to avoid/minimize the risks and, on the other hand, to intimidate or discourage the commission of other detrimental facts.

In order to be applicable, tax legislation provides for sanctions (penalties, late payments, fines, etc.). Allingham and Sandmo (1972) set the level of tax evasion in direct and negative correlation (inversely proportional) with the probability of its discovery and the value of the fines and penalties.

The threat, the punishment leads to a non-natural, artificial attitude, little compatible with the idea of freedom (and, in general, the idea of free will). The pressure and the threat are in the antithesis with social responsibility. The implementation of a system based entirely on taxpayers’ coercion to pay tax liabilities is extremely costly and can be successful only if there is a tax administrator under every bed (Torgler & Schaltegger, 2005, p. 2). Many studies have demonstrated the limits of tax systems based on constraint (Alm, McClelland, & Schulze, 1992; Frey & Feld, 2002; Graetz & Wilde, 1985; Slemrod & Blumenthal, 1996).

In Romania, the tax constraint is put into practice by a legislative system that is mostly based on two pillars: the Tax Procedure Code (Law no. 207/2015) and the Law on Prevention and Combating Tax Evasion (Law no. 241/2005).

The new Tax Procedure Code replaced the old system based on surcharges for late payment with a more flexible one, based on interest and late payment penalties (accessory payment obligations), which are set by decisions of the tax authority.

Interest (seen as a tax deterrent) is defined as the accessory tax liability that is the equivalent of the loss suffered by the holder of the principal tax debt as a result of the debtor’s failure to pay at maturity the main tax obligations.

The default penalty is the sanction for non-payment at maturity by the debtor of the main tax obligations, and the penalty of non-declaration is the sanction for the non-declaration or the incorrect declaration in tax returns, of the taxes, duties and social contributions.

Fiscal interest is calculated for each day of delay, starting from the day immediately following the maturity date and until the date when the amount due is extinguished inclusively. The value of the interest in 2017 is 0.02% for each day of delay, the same amount as in the previous year. This corresponds to 7.3% this year (2017 has 365 days), compared to 7.32% in 2016 (it was a leap year) or 10.95% in 2015, when the value of interest per each day of the delay was higher, that is 0.03%.

The default penalty is calculated for each day of delay, starting from the day immediately following the maturity date and until the date when the amount due is extinguished inclusively. The late penalty was reduced from 0.02% (7.3% per annum) to 0.01% per each day of delay (3.65% per annum) on 1 January 2016, the amount valid also in 2017.

The non-declaration penalty applies only to the undeclared principal tax liabilities and established by the tax inspection through notices of assessment elaborated after January 1, 2016. It is calculated from the day immediately following the maturity date until the date when the amount due is extinguished inclusively. This does not exclude the payment of interest and penalties for late payment.

The above-mentioned normative act includes a 1% increase in late payment per month or fraction of a month in the case of tax liabilities administered by local tax authorities. In addition to these tax accessories, the Code of Procedure also provides for fines ranging from 50,000 to 2,700,000 RON (about, 110–5800 EUR).

In Romania, as a result of the fiscal control actions carried out, there have been ordered sanctions for a misdemeanour amounting to 221 million RON (the equivalent of 49.9 million EUR), consisting of civil fines and seizure of sums, illicit revenues and goods (The Performance Report of ANAF—2016).

The Law on prevention and combating tax Evasion (Law no. 241/2005) has a double addressability: on the one hand, to advise the natural and legal taxpayers on the obligation to contribute, through taxes and duties, to the support of public expenditures and to prevent the consequences of sanctions they expose themselves to in case of fraudulent evasion from the performance of tax duties and, on the other hand, to constitute the legal instrument on the basis of which is held the criminal liability of those who violates in bad faith the provisions of the law (Boroi & Rusu, 2006).

The law on preventing and combating tax evasion only penalizes offences of tax evasion and offences related to them (the penalty is exclusively criminal). From the point of view of the punishments provided by this normative act, the legislator has obviously emphasized his preference for imprisonment. Moreover, no alternative measures are provided for the execution of this type of punishment. In the case of tax evasion offences that caused damages of up to EUR 10,000,000, there is the possibility of applying the fine as an alternative sanction, and in the case of damages of up to EUR 5,000,000 it is mandatory to apply the administrative sanction (Toader, 2011).

This dual approach, Tax Procedure Code versus Tax Evasion Act, contravention versus offence, does not create a clear legal framework. Even if the degree of social danger of some acts is different, it is not necessary to strictly separate them. The rationale behind criminal or contravention criminality is the same, namely that the violation of certain rules on tax discipline of taxpayers requires a punitive response of the state. Regardless of the nature of the criminalization, the legislator proceeds from the assumption that a certain social value has been violated through this behaviour and a penalty is imposed either by criminal sanctions or by legal sanctions for a misdemeanour.

The option of penalizing criminal offences exclusively by the Tax Evasion Act is a proof that the legislator has obviously opted for adopting an authoritarian model that underlines the absolute trust of the state in the criminal repression.

The unitary regulation of the two illicit forms, misdemeanour and criminal, has the capacity to reflect more coherently the criminal policy of the tax legislator (Gyuricza, Lascu, & Gyuricza, 2017). However, in view of the considerations regarding the conception behind the adoption of the law that incriminates tax evasion, namely the renouncement to the provision of illicit misdemeanour, the multiplication of criminal charges, the preservation of the principles of the obligation and the official nature of the criminal action, the preference for custodial sentences and reducing the role of the judge in the application of complementary punishments, the Romanian legislator clearly took over the authoritarian model in the field of tax crime and implicitly the lack of voluntary compliance.

The problem of authoritarian approach, however, is that it is very costly for the government and stressful for the vast majority of taxpayers. Both effects limit the viability and utility of such an approach to the lack of voluntary compliance. Government spends a great deal of resources (time, money, staff, sometimes even a loss of positive image) to hunt fraudulent behaviour, and the taxpayer has to worry about the harsh consequences of the lack of voluntary compliance.

The cost of tax collection in Romania in the period 2013–2015, according to the Ministry of Public Finance, ranged from 1.15 RON to 1.02 RON per 100 RON collected taxes. On a simple search on Google (23 November 2017), the phrase ‘tax stressful’ resulted in approximately 19 million Internet pages on this subject. The pressure created by too much authority can have effects contrary to expectations, creating an increased resistance (immunization) among taxpayers (Kirchler et al., 2008).

If people be led by laws, and uniformity sought to be given them by punishments, they will try to avoid the punishment, but have no sense of shame. If they be led by virtue, […] they will have the sense of shame, and moreover will become good. (Legge, 2001, p. 146)

Countries like the US, Australia, Canada, Italy, Spain, or the UK have developed voluntary compliance programs that offer various tax incentives such as reducing penalties or exempting from imprisonment those enrolling in these programs. Among those most targeted by these programs are people with wealth and high incomes, which are an important source of revenue for the budget .

In Romania, an important first step towards encouraging voluntary compliance is the adoption of the ‘Prevention Law’ (December 2017). According to this normative act, no fines can be applied at the first finding of a fact, but only on the condition that it is of a contraventional nature, not of a criminal nature. Thus, for acts that constitute contraventions and are provided by certain normative acts, including the Tax Code and the Tax Procedure Code, taxpayers will be granted a period of 90 days in which they will be able to correct the irregularities and comply with the legal provisions.

Taxpayers, on the one hand, should bear in mind that now is a good moment for tax compliance, and tax authorities on the other side must encourage taxpayers to voluntarily comply through clear messages on non-application of punitive measures such as criminal ones, thus facilitating the process of declaring and paying taxes with positive effects on the whole society .

2.2 Norms

The term ‘norm’ is explained in the Dictionary of Neologisms as a mandatory rule, a law that someone or something has to follow (Marcu & Mânecă, 1986). Normality (of a person or situation) thus appears as a measure of compliance with the norms, constraints and prescriptions of the society to which that person belongs.

Failure to observe the norms and models of society denotes a deviant behaviour, a departure from the normality of life and social order.

Conformation or non-compliance with norms leads the human being to occupy a position (role, status) in that society and this position receives a value (positive or negative) according to society’s expectations for that role or status in the sense of conformism or of the evolutionary projection of that human societies.

By enacting a norm, all other possibilities for action in the field covered by that norm are basically excluded. Acceptance of norms increases the social responsibility of community members, reducing the possibility of tension or social conflict, thus contributing to social cohesion , to the health of the respective community. The internalization of norms makes the human subject to know the way it operates and is organized the society in which it lives, making easier for it the task that it has as a roles and status holder. Specifically, if the norm is perceived to be strongly against evasion, but the person has not internalized this norm, then harsher sanctions will increase compliance rates. Wenzel (2001, 2004) argued that personal norms are, in fact, internalized social norms.

Norms are particularly effective drivers of tax compliance (Braithwaite, 2009; Onu & Oats, 2016). Social norms do not always predict compliance behaviour in a straight-forward manner, and their effect depends on the context in which they operate.

Under social norms and the theory of reciprocity, those taxpayers who believe that most other taxpayers comply, are more inclined to comply in their turn (Kahan, 2003). Conversely, in communities with non-compliance norms, some taxpayers, even if they have an initial inclination to comply voluntarily, due to the settled habit, will also adopt an attitude of non-compliance. Taxpayers belonging to a group with an inclination to comply may exert some social pressure on others to comply (for example, they can induce the feeling of shame or dignity), and members that evade may feel guilty or unworthy when they violate the norms. Other studies suggest that in the case of certain taxpayers who comply with social norms, compliance may decline if they begin rationalizing that their own compliance is based on the threat of government sanctions (Kahan, 2002). Thus, Fleisig-Greene (2007) notes that a large part of taxpayers who have recently been audited and sanctioned, subsequently reported lower taxable income. It can therefore be concluded that recursing to positive social norms seems to increase the level of compliance, while deterrence threats have little or even the opposite effect.

An important role in adopting positive norms among different taxpayers’ communities is the publicity of positive or negative attitudes. Thus, advertising that suggests that most small businesses comply may be particularly effective in promoting compliance with this norm by others because of the way small businesses are seen. Most often these, in the collective mind, are considered an economic engine and citizens are becoming closely aware of them.

In Romania, a positive effect for boosting tax compliance is the publication by the National Agency for Tax Administration (ANAF), starting with 2016, of the list of taxpayers with the highest outstanding tax liabilities (the so-called ‘list of shame’).

Social norms lead to a generic, non-implicit compliance behaviour, in which punishment has a place but is not decisive.

2.3 Tax Morale

According to Feld and Frey (2002) or Braithwaite and Ahmed (2005), tax morale is perceived as the internalized obligation to pay tax. With other words, tax morale is defined as the motivation of a country’s citizens to paying taxes, in addition to legal obligations. Luttmer and Singhal (2014) define tax morale as being an umbrella term capturing non-pecuniary motivations for tax compliance as well as factors that fall outside the standard, expected utility framework. Tax morale is a multidimensional concept and requires an interdisciplinary approach (Alm & Torgler, 2006) like political science, psychology, and sociology.

The concept of tax morality can be better and easier to understand if we relate to the factors identified to characterize it. The literature offers a wide range of factors that influence tax morality. Sá, Gomes, and Martins (2016) grouped these factors into five categories: personal and demographic factors (age, gender, marital, status, education and labour status), economic factors (fines, probability of audit, income), sociological and behavioural factors (religiosity, perception of others behaviour), psychological factors (trust, pride, equity, tax evasion, happiness) and political factors (political participation).

This means that people’s attitudes towards taxation are shaped by socio-economic variables as well as by the perceptions on state institutions, the use of tax revenues, the quality of public services and the degree of penetration of democracy (Cummings, Martinez-Vazquez, McKee, & Torgler, 2009). For example, women tend to be more tax compliant than men (D’Attoma, Volintiru, & Steinmo, 2017; Hasseldine, 1999; Spicer & Becker, 1980; van Dijke & Verboon, 2010), religious believers are generally more compliant than non-believers (Torgler, 2006; Gupta & McGee, 2010; Ross & McGee, 2011; Strielkowski & Čábelková, 2015; etc.).

Reforms that increase transparency and efficiency in the way in which revenues are used (where public service quality is vital) could contribute raising the degree of tax morality and, therefore, to a better tax compliance.

In Romania, the corruption perceived in the system of spending the public money and the power used by the arbitrary state to direct the collected revenues, seriously affects tax morality.

In states that treat their citizens with respect and openness, involving them in the decisions on directing public money, people are much more willing to contribute financially to budget spending. As the public administration constantly shows to the citizen that it only needs to respect some decisions, the more it will be motivated to seek solutions to avoid tax obligations. The disrespectful attitude of the official in the financial administration and of the political factors is identified as a factor that greatly contributes to the discouragement of tax morality.

The moral vision on taxes is also negatively influenced by unjustified distinctions that budget allocations often make between people from different social or professional categories (military, magistrates, lawmakers). The payment of taxes is no longer seen as a citizen’s act of loyalty to the state, as long as the redistribution made by it is directed mainly towards an alleged social pretence or temporal hierarchy in the political order.

The seemingly permissive or ineffective attitude shown by Romanian tax authorities to the phenomena of major evasion in certain sectors of activity accentuates socially the belief that ordinary people bear larger or unfair tax burdens instead of big fraudsters. It has been propagated a lot in the domestic society the vision that ‘we pay for others to take advantage’, which is extremely damaging when it comes to the degree of tax morality.

An important role in addressing and inducing a moral attitude when it comes to taxation is the institutional transparency (communication, decision-making, spending of public money) of the Ministry of Public Finance. Tax education is also very important. Romania is not doing well in any of these chapters.

In the study financed by Norway Grants, entitled ‘Enhancing Integrity in the National Agency for Tax Administration through Institutional Cooperation and Capacity Building ’ (April 2016), among the vulnerabilities identified at institutional level in the field of tax inspection and control activities are stated expressly: non-transparency/non-publication of control methodologies, as well as the lack of methodologies/guidance on the individualisation of applicable sanctions. A non-transparent system for managing complaints submitted by taxpayers is another identified vulnerability. The same study shows that 31% of the total number of employees of the National Agency for Tax Administration (ANAF) who responded to the sociological survey believe that there is a lack of communication within the institution, and 3% consider that the whole communication is non-transparent, being hidden important aspects.

In the field of tax education, it is relevant that the Ministry of Public Finance does not carry out until now (December 2017) any programs in collaboration with schools, high schools or universities to meet the need for knowledge and education in this field. Given the tremendous social impact of taxation, we believe that an incisive tax education campaign that targets all the social classes of Romanian society (from pre-school to retired people) is absolutely necessary. Only in this way can we hope to increase the degree of tax morality and implicitly of the social responsibility of the citizens with a direct and positive implication on the voluntary compliance attitude.

2.4 Trust

Tax rules must enjoy legitimacy as large as possible. Only then will they receive a tacit social validation and will prove their practical effectiveness without the need for coercion. In Romania, economic difficulties, poverty that marks wide social strata and deepening the perception of the ineffectiveness of state actions contribute essentially to increasing citizens’ dissatisfaction with the tax system and implicitly with the tax rules.

When assessing the effectiveness of tax rules, many taxpayers balance what they pay with what they receive in return from the state, and they often have the feeling of imbalance, to their detriment. The impression that many public funds are wasted or that various government services are inadequate marks citizens’ attitudes to tax, and they feel it is natural to resist inefficiency rather than to feed it with resources. Implying an amputation of its wealth, the taxpayer looks at its binding relationship with the state also through the prism of what owe other citizens with a contributory capacity comparable to its. When the result of this comparison denotes an inequality, it becomes a new source of tax illegality and pushes the citizen away from voluntary tax compliance.

From this point of view, legitimacy must be an attribute of any social norm, including tax ones. In any practical situation, it also brings an increase in effectiveness by sensitively diminishing the dissent towards state actions. The tax norm must be carried out within a social division of responsibility between the State and the taxpayer.

Taxpayers’ confidence in the fairness of tax norms and the integrity of institutions that require them, starting with the government , is essential to maintain taxpayers’ compliance.

Tax rules currently have a strong social delegitimization (lack of trust) in our country, without being an exclusive feature of Romania. The lack of legitimacy reveals a serious crisis of the state authorities, especially if it tries visibly and persistently to replace legitimacy with coercion excess. An illustrative example of this is recently adopted Emergency Ordinance no. 79/2017 for amending and completing the Law no. 227/2015 on the Tax Code, which is contested by a large part of the society : trade unions, employers’ organisations, Tax Council (2017, December), but also by a part of the government people (the president of the country and mayors). This practice weakens both the tax system and the state. The domestic tax law-making process seems rather a quantitative competition. Reforming in this area has in recent years been an obsessive concern for increasing the efficiency of collection by methods based on increased tax bases, excessive bureaucracy, extremely numerous changes in legislation, exponential growth of declarative obligations and control incisiveness. The Romanian legislator does not seem to notice that the genesis of numerous evasion actions lies in the very essence of the established normative framework.

Delegitimization occurs when a large proportion of the population no longer considers tax as a natural and just contribution to public spending. This happens on the background of the permanent media assault, devoted to the abuse and disinterest of some dignitaries, representatives of the ruling political class, or of categories of people very rich in the use of public money. There appears the perception that political decision-makers and the administration are not seeking the general interest.

In 2016, referring to trust, the president of the Romanian Tax Council declared that:

The degree of voluntary compliance with taxes and duties will not increase even if they are reduced by half if there is no improvement in the public services received in their exchange, taking into consideration that infrastructure , education and health are poor. (Comisia Europeană recomandă României să îmbunătățească gradul de conformare voluntară la plata taxelor, 2016, May)

Therefore, in our opinion, crucial for the concept of voluntary compliance is the taxpayers’ trust and conviction that the tax administration respects the taxpayers’ rights and operates according to the principle of integrity and honesty.

The survey on citizens’ trust in public institutions, titled ‘INSCOP Barometer—The truth about Romania’ (2016, March) conducted by INSCOP Research shows a very low degree of trust in ANAF: 37.9% (April 2015), 38.7% (July 2015), 41.9% (September 2015), 40.7% (November 2015), 39.5% (March 2016).

In order to trust the tax system and its institutions, citizens must be convinced that it is an honest system, administrated impartially. For these reasons, it is important for the tax administration to establish the right balance between serving the citizens and the honest and impartial application of tax legislation.

2.5 Complexity and Convenience

Taxpayers who are confronted with complicated rules may be unable to comply with them or may use their complexity as a reason to justify the lack of tax compliance. The more complex a tax system is, the more complicated it can be for taxpayers, natural persons or companies to access it.

A TMF Group study titled ‘The Financial Complexity Index 2017’ positions Romania in the second part of a ranking of tax systems complexity, that is the 54th of the 94 states and tax jurisdictions analysed. It should be noted that the ranking must be understood in the opposite direction: that is, the first positions mean a complicated tax system, while the last places show very simple legislation. Therefore, Romania is in the second half of the ranking, close to our country being among the European states Netherlands, 55th place, or Czech Republic, 60th place. It should be noted that, for example, Slovakia and Bulgaria are in positions that show that they have a simpler tax system than Romania.

However, it is difficult to say what position the tax system might occupy if recent changes to tax legislation (transfer of social contributions from employer to employee, ‘split VAT’ system, etc.) are introduced. Probably the tax index would deteriorate significantly because these changes have the ‘quality’ to complicate the tax procedure.

Tax complexity is not a virtue. On the contrary, simple tax systems are the closest to taxpayers and, of course, the easiest to understand and apply. The simplest tax systems are the so-called ‘tax havens’.

The index made by the TMF Group confirms that, special tax jurisdictions being ranked as such. Leaving aside tax extremes, there are also some states that have simple tax systems. Among them are the United Arab Emirates, Hong Kong, Switzerland or Slovenia. For example, the study shows that there are no taxes for corporates or natural persons in the United Arab Emirates, there are also no limits to repatriation of capital or profits. Of course, there is a specificity of the tax system in the Persian Gulf area.

On the opposite side, the 10 countries with the most complex tax systems are in order: Turkey, Brazil, Italy, Greece, Vietnam, Colombia, China, Belgium, Argentina and India . So, in the top ten countries there are two countries of the European Union , Greece and Belgium.

The study also provides some explanations. Turkey has the most complex tax system due to the existence of an extremely high number of tax provisions. In Italy, taxes are levied at national, regional and municipal levels, while in Greece taxes are divided into three categories: income, property and consumption. Finally, the study notes that an improvement in the tax system can be achieved by digitizing and computerizing the relationship between revenue service and taxpayers. Romania is taking steps in this direction, but quite small.

Also, the degree of comfort offered by a stable tax system is extremely important when it comes to the issue of voluntary tax compliance.

Biriş (former Secretary of State in the Ministry of Public Finance), an important Romanian tax specialist, referring to the stability of the domestic legal framework, made the following statement:

This tax code, Law 227/2015 and, of course, I am talking only about the Tax Code, and not about the Tax Procedure Code, which may have problems even bigger than the Tax Code, was amended four times before it came into force (January 2016), some changes being significant. In total, in two years, it has been amended by 20 government ordinances, government emergency ordinances, laws amending the Tax Code or laws approving emergency ordinances or ordinances. We have not only amendments, but we already have amendments to the amendments in two years. Year 2017 is, from tax point of view, a nightmare. I have been working for 22 years, 23 soon, when all the profession (tax consultant) is 25 years old in Romania. In 23 years I do not remember a worse year in Romanian taxation than this year. (2017, November)

The need for complexity and convenience, in Romania, is also underlined by the results of the study from 2016 conducted by EY (Ernst & Young) Romania in association with Raiffeisen Bank , entitled ‘Romanian Entrepreneurship Barometer’. In this study, 70% of respondents ranked the top of the biggest obstacles to business creation and development in Romania, the pronounced instability of the tax legislative framework. Among the measures that could have the biggest impact in supporting entrepreneurs in the short term, creating a clear, effective and simplified legislative framework was identified as the second most relevant (15% of the respondents). Also, to the question, what do you think is the most important obstacle for entrepreneurs in Romania? The answer ranked first was the ‘fiscal and legislative framework’ (35% of the respondents).

In the study titled ‘Increasing Integrity in the National Agency for Tax Administration through Institutional Co-operation and Capacity Building ’ (April 2016), one of the main corruption vulnerabilities within ANAF is unstable, cumbersome tax legislation and in some inconsistent situations (containing unclear provisions or even contradictory). Vulnerability has been identified by all target groups: citizens, economic agents and tax and customs officials.

The obvious conclusion is that Romania needs an immediate stabilization of the tax normative framework and a decrease in the degree of tax complexity that will cause the largest possible number of taxpayers situated on an asymmetric level of information and understanding to adopt an attitude of social responsibility and voluntary tax compliance.

3 Conclusion

In Romania, the need to change the paradigm in terms of social responsibility and implicitly voluntary tax compliance is evident for any specialist. A new tax philosophy should be adopted to ensure both a stimulating and non-discriminatory environment and to improve the transparency , stability and predictability of tax policy .

Voluntary compliance is difficult. Without the transparency of public institutions, without fast and discreet payment methods, with no clear reporting on how public money is spent, this approach is almost impossible. The study of factors that induce voluntary tax compliance highlighted a number of domestic tax system issues.

The low tax culture of taxpayers (but also of many tax administration officials) may also be a factor in distorting their attitude towards voluntary tax compliance. It takes, in this context, an increasing awareness of the positive effects of social responsibility implementation, a more developed organizational culture and involvement in the wider sense of all the actors (Sitnikov & Bocean, 2013).

There is a need for a national-level pedagogical effort to explain and motivate tax, but also to change the attitude of decision-makers, because when they declare their adversity towards the tax system, a significant number of taxpayers invoke the unjust political order and regard taxes as means by which the state rob them. Also, tax is often seen as means of enriching those in management who, while preserving their legal legality, lose their citizenship legitimacy . There is a perception that political and administrative decision-makers do not always seek the general interest (as they say).

We believe that a profoundly damaging effect on taxpayers’ attitude towards tax obligations may be exaggerated fiscal sanctions, asymmetrical in relation to the facts found by inspection bodies, or even the practical ways in which audit is exercised and completed. The major communication deficit of tax administration bodies, associated with the opacity of many tax norms, creates a situation favourable to unintentional deviations. In Romania, as we have seen, it has diminished a lot the feeling of trust in the administrative or judicial bodies, which have to watch the observance of taxpayers’ rights.

Poor quality and inconsistency of public services (infrastructure , health , education, transport, etc.) deepen the unfavourable perception of the population on budgetary choices and policies and push citizens away from voluntary compliance. The society tends to reject contributions for what is perceived to be useless. This phenomenon is sustained by the visible phenomena of scattering the collected resources through allocations for irrational objectives, while the vital needs of the population remain unsatisfied.

The apparent existence of tax irregularities, perceived by the state as insecurity or tax risk, leads regulations to move towards severe constraints, considered by most taxpayers to be an unjust punishment. They can take either the form of explicit sanctions or the form of endless bureaucratic rules. The enormous set of regulations seems to be, from the perspective of the taxpayer, that it has the sole purpose of ‘doing wrong’ rather than providing clear ways in the application of fair tax principles. Taxpayers feel that they are permanently exposed to the risk of being created an artificial, unfavourable legal situation for the purpose of additional taxation.

The state must accept that the lack or reduced tax compliance can also be the result of an imperfect legislation, controversial and inconsistent, badly assimilated by taxpayers, or wrongly implemented by officials who induce a confrontational atmosphere instead of a co-operative one. This situation creates a social responsibility deficit and will make the taxpayer believe that deceiving the tax authorities is a test of skill.

In a society where the taxpayer does not trust the equity and fairness of the tax system and the correlated moral obligation to pay taxes and duties, the presentation of the option between paying with years and paying with money can result in a third choice, namely not to pay with money and, depending on the degree of risk in discovering the facts, possibly not even with years. (Vîrjan, 2011)

If legal regulations ignore the concept of justice, they will unbalance society and the rule of law. The state is best represented by its institutions. When they are perceived by the citizen as being oppressive, wasteful or parasitic, the state can not rely on the loyalty of its own citizens.

In conclusion, it is absolutely necessary to stimulate the process of modernization of the tax administration and to improve the administrative-tax capacity, so that the degree of voluntary tax compliance reaches the level in the developed countries of the European Union .