Paper short abstract:

The pandemic presents great financing needs, which must be supported by tax revenue. How does citizens’ compliance attitudes and perceptions shift during the crisis? We document an increase in taxpayers’ perceptions of tax fairness, and a shift from unconditional to conditional compliance.

Paper long abstract:

The pandemic has important implications on tax revenue. At the same time, it presents financing needs that are greater than ever, which in turn require a continued effort on tax mobilisation. For those efforts to succeed, citizens’ collaboration in complying with tax laws is essential. However, their perceptions and willingness to pay taxes could potentially shift in opposite directions: they might be more willing, as they realise the importance of tax revenue in crisis response, or they might be less compliant, because taxes are an additional burden at an already difficult time. Exploiting a unique dataset that captures information on perceptions and attitudes to compliance before and after covid-19, this study evaluates how the pandemic shifted perceptions around equity and trust in tax systems, as well as attitudes to conditional and unconditional tax compliance. We find large and significant improvements in taxpayers’ perceptions about the fairness of the tax system, and a significant shift from unconditional compliance to a conditional version that links more closely tax with public service delivery. Our survey data also allows us to evaluate access to tax relief during the pandemic, and how that might affect perceptions about the tax system. Despite tax relief being available to everyone, only relatively larger and more sophisticated firms access it in practice. We also explore public support for additional taxes on the rich, on property, large companies, or everyone. Our results have important implications on policy during and after the pandemic.