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In a research article, “tax culture: A basic concept for tax politics”(1), Dr. Birger Nerre, GIZ expert, defines the concept of tax culture as “the tax tradition of a country and its interaction with the cultural value of taxpayers, such as honesty, sense of duty, or justice.” In this study, Nerre identifies two types of cultural clashes related to tax culture, considered as “All the formal and informal institutions associated with a national tax system and its practical implementation, historically embedded in the culture of the country” .

When there is an attempt to transfer tax system changes in an existing “tax culture”, institutional or social conflicts may arise. The author uses the concept of “Tax culture shock “, which can occur at the individual or micro level, as well as collective or macro level, to describe the encounter with an unknown or foreign tax culture.

Individual tax Cultural clashes are common in the current context of globalization, where residents often pay more and more taxes in a country other than their country of origin. This can lead to feelings of insecurity, perceptions of unfair procedures etc. … that can motivate the expatriate taxpayers either to return to their country of origin or to adapt to the tax culture of the new country.

Collective tax culture shocks, on the other hand, are less frequent but their consequences are much more serious, they happen when a tax measure is imposed from outside, or when it is perceived as such. The image of the current situation in Greece comes to mind, where collection efforts to address the state budget deficit are widely regarded as arbitrary and under pressure from the country’s foreign creditors, against the population’s standard of living.

A more classic example of this phenomenon was the introduction of VAT in Japan. U.S. tax experts had tried to introduce a VAT system shortly after the Second World War, but with a design not adapted to Japanese culture and that could adversely affect the development of big companies. The proposed tax was rejected in 1954. However, the fear suffered by the Japanese towards the concept of VAT was resented for decades, and it was not until 1989 that they introduced a modest Japanese-style VAT concept.

Another interesting concept introduced by Dr Nerre is “Tax Culture Lag.” When a country reforms its tax system, introducing new rules or new technologies, part of the population adapts quickly to the new rules while others do not or resist to the change. This creates a “Tax Culture Lag” for part of the taxpayer population, which can be profound if changes are important.

First, the authorities and the tax administration officers have to be trained to comply with the new measures or rules. Then the taxpayers have to change some of their behaviors. In case of resistance to change, at least initially, a drop in productivity of tax agents and tax morale of taxpayers can be expected. In developed countries, these changes are usually mild and introduced gradually, however this is not the case in developing countries, where economies in transformation call for rapid changes, and tax cultural lags may seriously affect their development, especially if citizens have past experiences or corrupt authoritarian systems, where the tax was not associated with the service of the common good.

Changing this “perception” in the transforming economies of developing nations requires much more effort in education and, above all, much time.

For the international tax expert, it is essential to know that trying to change a tax code without considering the national tax culture can result in serious collection problems. Similarly, if taxpayers do not receive efficient state support, they tend to consider legitimate to delay or evade their tax payments.

In conclusion, international organizations such as the World Bank or the International Monetary Fund have recently re-discovered the importance of national cultures in designing tax policy and tax reform in developing countries. “Preventing collective tax culture shocks should be a normative criterion for “good” international and sound national tax policies”. Regarding tax cultural lags, these are inevitable given the speed of global changes, but they should be evaluated and monitored through better studies of the interactions between taxpayers and their tax institutions.

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