Based on a theoretical model in which voters' tax compliance behavior is driven by fairness concerns, we empirically analyze the channels through which ideological stances of individuals and governments impact on tax compliance behavior. Our data is from the WVS and the EVS and comprises nearly 48,000 observations from 23 OECD countries over the period 1995-2012.
Our results indicate that the consequences of a change in government ideology caused by a shift from a moderate right-wing to a moderate left-wing coalition reduces the probability to exhibit the highest tax compliance level of voters in a country with average public sector size by 1.31%. This effect is twice as large in a country whose public sector size lies 5 percent above the average.
These results highlight the importance of ideological stances in tax compliance and indicate that policy makers should focus their attention on the increasing ideological polarization recently observed in developed countries as a hurdle for reducing tax evasion and avoidance.