Is deterrence approach effective in combating tax evasion? A meta-analysis

  • Received January 20, 2019;
    Accepted March 6, 2019;
    Published April 25, 2019
  • Author(s)
    Muh Dularif
    ORCID , Sutrisno T. , Nurkholis , Erwin Saraswati
  • DOI
    http://dx.doi.org/10.21511/ppm.17(2).2019.07
  • Article Info
    Volume 17 2019, Issue #2, pp. 93-113
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  • Cited by
    5 articles
  • 1498 Views
  • 743 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The purpose of this paper is to present the results of a meta-analysis of the relationship between determinant factors and tax evasion based on deterrence approach. Using the meta-analysis method, each statistical result of empirical studies is converted into r-pearson as standardized effect size, and then synthesized into a mean effect size in order to increase power and to resolve uncertainty. Theoretically, increasing audit, tax rate and tax penalty will decrease tax evasion. However, the results show that only tax rate has a significant impact on tax evasion. Synthesizing totally 478 outcomes from articles published between 1978 and 2018, there is a robust conclusion that decreasing tax rate is an effective tool in combating tax evasion. On the other hand, audit and penalty are not significant in influencing tax evasion. In addition, the results of heterogeneity analysis suggest that national culture and income level of the country are useful in explaining the impact of audit, tax rate and tax penalty on tax evasion. These findings should be of interest to policymakers. First, instead of sacrificing more resources in conducting audit or imposing more penalty, tax authorities should consider setting the tax rate as low as possible to diminish tax evasion. Second, considering that culture and income level influence the impact of audit and penalty on tax evasion, policymakers should consider national cultural values and income level condition when designing audit techniques and setting penalty structures.

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    • Figure 1. Composition of papers and outcomes – audit
    • Figure 2. Composition of papers and outcomes – penalty
    • Table 1. The paper composition
    • Table 2. Results – vote-counting method – audit
    • Table 3. Results– vote-counting method – tax rate
    • Table 4. Results – vote-counting method – penalty
    • Table 5. Hypothesis testing – meta-analysis – audit
    • Table 6. Hypothesis testing – meta-analysis – tax rate
    • Table 7. Hypothesis testing – meta-analysis – penalty
    • Table 8. Moderator variables – audit
    • Table 9. Moderator
    • Table 10. Moderator variables – penalty
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