How family ties affect trust, tax morale and underground economy

This paper reports empirical evidence supporting the hypothesis that family ties should be considered among the main determinants of tax morale, underground economy and trust. In societies where the power of the family is very high, the quality of public institutions tends to be low. This connection shapes the behavior of taxpayers and tends to increase the underground economy. The econometric analysis is based on linear panel data models and a new original dataset that puts together data on personal values, social capital and tax morale, in combination with an index of the shadow economy. The final results show that in countries where family ties are stronger, the level of trust and tax morale is lower, while underground economy is higher.eng