Goals and Strategies: Role of Legitimacy in Shaping Tax Compliance in Hungary

Scholars readily agree that the role of government activities and strategies is continuously increasing in shaping taxpayer behavior. First, as an important effect of the dynamic development of digitalization – especially by the expanded use of online administrative systems – the relation between taxpayers and tax authorities has changed. Furthermore, strict control of the government on tax authorities increases the number of decisions on tax administration made at government level. Therefore, citizen perceptions of the quality of government services became an essential influencing factor of tax compliance. As a result, legitimacy of the government may fundamentally form tax behavior. Hungary represents an interesting case as compared to western democracies the degree of centralization is high. However, it remains a question, how government influences taxpayer behavior in Hungary? Can legitimacy effectively strengthen tax compliance? To answer these research questions I used a vignette experiment embedded in a focus group research with taxpayers of public and market sector. Using the case of government legitimacy I designed a vignette experiment with two hypothetical stories that varied in the level of legitimacy. More specifically, in the first story I had a hypothetical government with a high legitimacy, which in the second case decreased significantly. I assigned the various vignette conditions to four main blocks about the role of tax laws and legal framework; social and political environment; taxpayers’ relation with tax authorities; and with the government. My preliminary findings indicate that public services with high quality mean a guarantee for citizens that their tax has been spent in an effective way. In case of low legitimacy this expectation has been threatened, which weakens the level of tax compliance.