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Introduction

Most studies that have been done on tax evasion take a public finance perspective. Very few studies look at tax evasion from the perspective of ethics, philosophy, or religion. However, there are some exceptions. A study by McGee (1994) took a philosophical approach. One of the most comprehensive analyses of tax evasion from an ethical and religious perspective was a doctoral thesis written by Martin Crowe in 1944. The Journal of Accounting, Ethics & Public Policy published a series of articles on tax evasion from various religious, secular, and philosophical perspectives in 1998 and 1999. Most of those articles were also published in an edited book (McGee 1998a). Since the publication of that book, a few other articles have addressed the issue of tax evasion from an ethical perspective.

The ethics of tax evasion can be examined from a number of perspectives. Some of these are of a religious nature while others are more secular and philosophical. One approach is to examine the relationship of the individual to the state. Another is the relationship between the individual and the taxpaying community or some subset thereof. A third is the relationship of the individual to God. Martin Crowe (1944) examined the literature on these approaches, which are the three main approaches that have been taken in the literature over the past five centuries.

A review of the literature reveals that three basic viewpoints on the ethics of tax evasion have emerged over the centuries. Some scholars have taken the position that tax evasion is always unethical (Cohn 1998; DeMoville 1998; Smith & Kimball 1998; Tamari 1998). Others believe that tax evasion is always ethical because there is absolutely no duty to the State (Spooner 1870). A third group believes that tax evasion can be ethical under certain circumstances (Crowe 1944; Gronbacher 1998; Pennock 1998; Schansberg 1998).

One empirical study on the ethics of tax evasion was done by Nylén (1998), who did a survey soliciting the views of Swedish chief executive officers (CEOs). McGee (1998e) commented on this study. A study by Reckers, Sanders and Roark (1994) presented participants with a case study and asked them whether they would be willing to evade taxes. Englebrecht et al. (1998) did a study involving 199 subjects who replied to 29 ethical orientation questions, some of which had to do with tax evasion. Inglehart et al. (2004) conducted a large survey of more than 200,000 ­people in more than 80 countries that asked more than 100 questions, 1 of which was about tax evasion. McGee and Cohn (2006) surveyed the views of Orthodox Jews on the ethics of tax evasion. Not many empirical studies have been done on the ethics of tax evasion from an ethical or religious perspective. The present study is aimed at partially filling this gap in the literature.

Review of the Literature

Although many studies have been done on tax compliance, very few have examined compliance, or rather noncompliance, primarily from the perspective of ethics. Even fewer studies have looked at tax evasion from a religious perspective. Most studies on tax evasion look at the issue from a public finance or economics perspective, although ethical issues may be mentioned briefly, in passing. The most comprehensive twentieth century work on the ethics of tax evasion was a doctoral thesis written by Martin Crowe (1944), titled The Moral Obligation of Paying Just Taxes. This thesis reviewed the theological and philosophical debate that had been going on, mostly within the Catholic Church, over the previous 500 years. Some of the debate took place in the Latin language. Crowe introduced this debate to an English language readership. A more recent doctoral dissertation on the topic was written by Torgler (2003), who discussed tax evasion from the perspective of public finance but also touched on some psychological and philosophical aspects of the issue. Alfonso Morales (1998) examined the views of Mexican immigrant street vendors and found that their loyalty to their families exceeded their loyalty to the government.

There have been a few studies that focus on tax evasion in a particular country. Ethics are sometimes discussed but, more often than not, the focus of the discussion is on government corruption and the reasons why the citizenry does not feel any moral duty to pay taxes to such a government. Ballas and Tsoukas (1998) discuss the situation in Greece. Smatrakalev (1998) discusses the Bulgarian case. Vaguine (1998) discusses Russia, as do Preobragenskaya and McGee (2004) to a lesser extent. A study of tax evasion in Armenia (McGee, 1999b) found the two main reasons for evasion to be the lack of a mechanism in place to collect taxes and the widespread opinion that the government does not deserve a portion of a worker’s income.

A number of articles have been written from various religious perspectives. Cohn (1998) and Tamari (1998) discuss the Jewish literature on tax evasion and on ethics in general. Much of this literature is in Hebrew or a language other than English. McGee (1998d, 1999a) commented on these two articles from a secular perspective. Another study, which used the same methodology as the present study, solicited the views of Orthodox Jews (McGee & Cohn 2006). That study found that Orthodox Jews were generally opposed to tax evasion, but some arguments were more persuasive than others.

A few articles have been written on the ethics of tax evasion from various Christian viewpoints. Gronbacher (1998) addresses the issue from the perspectives of Catholic social thought and classical liberalism. Schansberg (1998) looks at the Biblical literature for guidance. Pennock (1998) discusses just war theory in connection with the moral obligation to pay just taxes, and not to pay unjust or immoral taxes. Smith and Kimball (1998) provide a Mormon perspective. McGee (1998c, 1999a) commented on the various Christian views from a secular perspective.

The Christian Bible discusses tax evasion and the duty of the citizenry to support the government in several places. Schansberg (1998) and McGee (1994, 1998a) discuss the biblical literature on this point. When Jesus is asked whether people should pay taxes to Caesar, Jesus replied that we should give to Caesar the things that are Caesar’s and give God the things that are God’s (Matthew 22:17, 21). But Jesus did not elaborate on the point. He did not say what we are obligated to give to the government or whether that obligation has limits.

There are passages in the Bible that may be interpreted to take an absolutist position. For example, Romans 13, 1–2 is read by some to support the Divine Right of Kings, which basically holds that whoever is in charge of government is there with God’s approval and anyone who disputes that fact or who fails to obey is subject to damnation. It is a sin against God to break any law. Thus, according to this viewpoint, Mao, Stalin, and Hitler must all be obeyed, even though they were the three biggest monsters of the twentieth century, because they are there with God’s approval.

A few other religious views are also addressed in the literature. Murtuza and Ghazanfar (1998) discuss the ethics of tax evasion from the Muslim perspective. McGee (1998b, 1999a) comments on their article and also discusses the ethics of tax evasion under Islam citing Islamic business ethics literature (McGee, 1997). DeMoville (1998) discusses the Baha’i perspective and cites the relevant literature to buttress his arguments. McGee (1999a) commented on the DeMoville article. McGee (2004) discusses these articles in a book from a philosophical perspective.

If one were to summarize the views of the various religious groups in a few words, one could say that Jews, Mormons, and Baha’is are strongly opposed to tax evasion, whereas other Christians, including Catholics, and also Muslims take a more flexible approach. Jews, Muslims, and Baha’is all take the position that one must obey the laws in the country in which one lives. The Jewish literature also says that one must never do anything to place another Jew in a bad light. If a Jew were found guilty of tax evasion, it would place shame on the entire Jewish community. Thus, Jews should not engage in tax evasion.

The Christian literature (Crowe 1944; Gronbacher 1998; McGee 1998c, 1999a; Pennock 1998; Schansberg 1998) would consider tax evasion to be ethical where the tax system is perceived as unfair, where the government is corrupt or where the tax collector is engaged in an unjust war. According to the Muslim business ethics literature, Muslims believe that there is no duty to pay any tax that results in prices being raised, such as sales taxes, value added taxes, or tariffs. This literature also indicates that there is no duty to pay a tax that is based on income (Ahmad, 1995; McGee 1997, 1998b, 1999a; Yusuf 1971). However, a conversation one of the present authors had with a Muslim scholar found that not all Muslims take this position. That scholar said that the literature cited in those Islamic business ethics books is a complete misreading of the Quran and that God commands Muslims to pay taxes. Thus, there is apparently room for discussion on the Muslim view.

The Church of Jesus Christ of Latter-day Saints (LDS) looks to several literary sources for spiritual guidance. Church members use the Christian Bible, of course, but they also have some religion-specific literature. The Doctrine and Covenants is a collection of divine and inspired revelations. The Pearl of Great Price touches on many significant aspects of the LDS religion and doctrine. Both of these religious books take the position that LDS members have a moral duty to support government.

One of the basic statements on the relationship of the individual to the State is as follows:

We believe that all men are bound to sustain and uphold the respective governments in which they reside, while protected in their inherent and inalienable rights by the laws of such governments; and that sedition and rebellion are unbecoming every citizen thus protected, and should be punished accordingly; and that all governments have a right to enact such laws as in their own judgments are best calculated to secure the public interest; at the same time, however, holding sacred the freedom of conscience. (The Doctrine and Covenants, Sec. 134, Verse 5).

This view was reiterated in a letter from Joseph Smith to the editor of the Chicago Democrat: “We believe in being subject to kings, presidents, rulers, and magistrates, in obeying, honoring, and sustaining the law.” (The Articles of Faith, in The Pearl of Great Price) Another Church document refers more specifically to obedience to tax laws:

Church members in any nation are to obey applicable tax laws. “If a member disapproves of tax laws, he may attempt to have them changed by legislation or constitutional amendment, or, if he has a well-founded legal objection, he may attempt to challenge them in the courts. A member who refuses to file a tax return, to pay required income taxes, or to ­comply with a final judgment in a tax case is in direct conflict with the law and with the teachings of the Church.” (General Handbook of Instructions, as quoted in Encyclopedia of Mormonism, vol. 3, p. 1097)

Smith and Kimball (1998) cite a number of other Church documents and ­statements by Church leaders, all of which say basically the same thing – tax ­evasion is not in keeping with Church law. Church doctrine views tax evasion as a form of dishonesty, even fraud. None of the documents Smith and Kimball cite make exceptions for unfair tax laws, tax rates that are deemed to be too high, or taxes that are paid to an evil or corrupt State.

The Church of Jesus Christ of LDS has addressed the issue of tax evasion on more occasions than most other churches. The views of the Church are also consistent. Tax evasion is wrong.

Several criticisms have been made of the absolutist positions espoused by some religions (McGee 1999a). For one, religious doctrine would apparently require ­individuals to comply with even the worst laws of an extremely corrupt or evil State, which does not make sense to those political philosophers who believe there are limits to what the State may demand or extract from the population. Political theory for the last few hundred years recognizes cases where obedience to the State is not absolute. These political thinkers (including Gandhi, Martin Luther King, and ­others) begin with the basic premise that the State exists to serve the individual and that evil laws may (or must) be disregarded, a possibility the absolutists do not consider.

Any issue relating to tax fairness could also be raised to criticize the absolutist position (Crowe 1944; McGee 2004, 1999a). Assuming there is such a thing as ­paying one’s “fair share,” (McGee 1999c) it might be argued that if one is forced to pay well beyond one’s fair share, there is no longer any moral duty to pay. Excessive redistribution and taxes that aim at social engineering rather than raising revenue for legitimate governmental purposes might also be cited as legitimate reasons for evasion. Using tax proceeds to kill Jews, Palestinians, Christians, Muslims, or Baha’is might also be used to justify evasion according to some scholars. The absolutist views do not take any of these cases into consideration. However, the purpose of the present study is not to criticize any absolutist view, but merely to present the results of a study aimed at discovering the state of present thinking by members of The Church of Jesus Christ of LDS.

The Present Study

Methodology

A survey instrument was constructed that included all three views on the ethics of tax evasion that Crowe (1944) identified in his thesis. Eighteen statements covering the 15 arguments that Crowe identified plus three more recent arguments were included. The survey was distributed to 638 students at a large college in the western USA, 562 of which belonged to The Church of Jesus Christ of LDS. The statements generally began with the phrase “Tax evasion is ethical if …” Participants were asked to select a number from 1 to 7 to reflect the extent of their agreement or disagreement with each statement. Results were tabulated and the arguments favoring tax evasion were ranked from strongest to weakest. Male and female scores were also compared, as well the scores by major area of study.

Table 13.1 shows the number of male and female responses. Table 13.2 shows the number of responses by major.

Table 13.1 Responses by gender
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Table 13.2 Responses by major
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Survey Findings

Table 13.3 shows the scores for each of the 18 statements. Respondents were asked to select a number from 1 to 7 to indicate the extent of their agreement or disagreement with each statement, where 1 indicated strong agreement and 7 indicated strong disagreement. Non-LDS members were excluded, since the purpose of this study is to learn the views of LDS members.

Table 13.3 Scores for LDS members (562)
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One of the main goals of the present study was to determine which of the arguments favoring tax evasion over the past few centuries were strongest and which were weakest. Table 13.4 shows how the arguments were ranked.

Table 13.4 Ranking of arguments – LDS members. Ranked from strongest to weakest. Arguments supporting tax evasion
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The strongest argument favoring tax evasion is in a case where the taxpayer is a Jew and the government is Nazi Germany. This argument was not discussed by Crowe but was added to test the limits. Surely if tax evasion is ever ethical it would be ethical in this case, since it is reasonable to expect that some of the proceeds collected would be used to exterminate Jews. Or at least that was the intent of including this argument in the present survey, to test the limits.

Although it was not surprising that this argument was the strongest of the 18, what was surprising was the lack of support for it. On a scale of 1 to 7, where 1 represents strong agreement, it received a score of 5.144, which means respondents thought that even Jews in Nazi Germany have an ethical duty to pay taxes to Hitler.

One explanation for such a high score might be because the respondents were members of the Church of Jesus Christ of LDS. The literature of this religion (Smith & Kimball 1998) strongly indicates that tax evasion is never justified. Another recent study (McGee & Cohn 2006) found that even Orthodox Jews strongly believe that Jews had an obligation to pay taxes to Hitler. The score for this statement in the Orthodox Jewish survey also ranked as the strongest argument to support tax ­evasion, with a score of 3.12 using a similar survey instrument. Perhaps the reason why even Orthodox Jews believe there is an obligation to pay taxes to Hitler is because the Jewish literature takes the view that tax evasion is always, or almost always, unethical (Cohn 1998; Tamari 1998).

Three of the 18 statements in the survey (S16, 17 and 18) might be labeled as “human rights” arguments to justify tax evasion. These were the three arguments that Crowe (1944) did not identify in his research. These were also the three arguments that scored highest in the present survey, meaning that they were the three strongest arguments justifying tax evasion. But even these arguments were not regarded as strong by the participants, since their scores were 5.144, 5.742, and 5.641, respectively.

It was found that the arguments to justify tax evasion were stronger in cases where the government was corrupt or inefficient or where the system was perceived as being unfair. Inability to pay also ranked high, which lends support to the arguments put forth by a scholar who discussed tax evasion in the Mexican culture (Morales 1998). Inability to pay was also identified as one of the most popular arguments favoring evasion in the Catholic religious literature (Crowe 1944).

The weakest arguments were found to be the arguments that might be labeled as selfish reasons. Chart 13.1 shows the range of responses to the 18 statements, with the statements ordered as they were in Table 13.4. As can be seen, some arguments had less disagreement than others, but none of the arguments received much support.

Chart 13.1
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Range of scores

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Table 13.5 compares male and female scores for each statement. Some studies in gender ethics have found that women are more ethical than men (Akaah & Riordan 1989; Baird 1980; Brown & Choong 2005; Sims, Cheng & Teegen 1996), while other studies found that there is no statistical difference between men and women when it comes to ethics (Roxas & Stoneback 2004; Sikula & Costa 1994; Swaidan, Vitell, Rose & Gilbert 2006). A few studies have found that men are more ethical than women (Barnett & Karson 1987; Weeks, Moore, McKinney & Longenecker 1999). It was thought that comparing the male and female scores would be interesting, although the comparison could not lead to any conclusion regarding the relative ethics of men and women, since, to arrive at that conclusion, one must begin with the premise that tax evasion is unethical, which may not always be the case. All that one may conclude from the present study is that Mormon women are more strongly opposed to tax evasion than are Mormon men.

Table 13.5 Comparison of LDS male and female scores
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Table 13.5 shows that the female scores were higher than the male scores in 16 of 18 cases. But applying Wilcoxon tests to the data found that female scores were significantly higher than male scores in only five cases. However, these findings do not allow us to conclude that women are more ethical than men. In order to arrive at that conclusion we must begin with the premise that tax evasion is unethical, which may or may not be the case. At least one author of the present study believes that tax evasion is not unethical for Jews living in Nazi Germany. Thus, all we can conclude is that Mormon women are sometimes more opposed to tax ­evasion than are Mormon men.

How does the Mormon view differ from the view held by non-Mormons? We answer that question in Table 13.6 by comparing the LDS and non-LDS responses. The sample consisted of 562 LDS and 59 non-LDS participants. The LDS scores were higher than the non-LDS scores in all 18 cases. The difference was significant at the 1% level in all 18 cases as well, leading to the strong conclusion that LDS members are significantly more opposed to tax evasion than are non-LDS members, regardless of the issue.

Table 13.6 Comparison of LDS and non-LDS scores
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Concluding Comments

The goal of the present study was achieved. The major arguments that have been put forward to justify tax evasion in recent centuries have been ranked. As expected, some arguments proved to be stronger than others. None of the arguments proved to be very strong, however, as indicated by the high scores received for even the strongest arguments.

The results show that Mormon men are more tolerant of tax evasion than are Mormon women where the system is seen as unfair, if a large portion of tax revenues are wasted, where the taxpayer does not have the ability to pay, if the taxpayer is a Jew living in Nazi Germany, or if the government discriminates against the taxpayer on the basis of religion, race, or ethnic background. The study also found that Mormons are significantly more opposed to tax evasion than are non-Mormons, regardless of the issue.