Question 1 (15 marks)

The States social perception is basic for approaching the causes and importance of evasion. Situations of impunity and corruption generate more fraud and discourage the compliant taxpayer. Undoubtedly, I believe that this issue of corruption illustrates most of the causes of evasion I have listedAbuse of the public function for ones own benefit reduces the peoples trust in the government and institutions, undermines the effectiveness and equity of the public policies, and misappropriates the taxpayers money, originally intended for schools, roads and hospitals.

Over 180 countries were analysed and the interesting conclusion was that the most corrupt countries collect less taxes, because the people pay bribes to avoid them; for example, through tax gaps conceived in exchange for bribes. In addition, when the taxpayers believe that the State is corrupt, tax evasion becomes more probable.

The study states that, globally, less corrupt governments collect 4% GDP in tax revenues than the countries having the same level of development with the highest levels of corruption. [Extract from: Alfredo Colloas. Which are the causes of tax evasion? Inter-American Centre of Tax Administrations. 25 June, 2019]

Required:

(a) Explain some key factors that lead to tax non-compliance in developing countries. (7 marks)

(b) Suggest possible measures to solve the problems of tax non-compliance in developing countries. (8 marks)