A Systematic Literature Review on Tax Evasion: Insights and Future Research Agenda

Emerging research studies in the subject of tax evasion have selected a variety of factors to verify their influence on the intentional non-compliance behaviour (tax evasion). However, a holistic review of tax evasion covering global literatures remains elusive. Therefore, this paper intends to conduct a systematic literature review (SLR) to review the existing articles in the past 10 years, encapsulating 100 papers starting from 2010, in which Organisation for Economic Co-operation Development (OECD) established the Convention on Mutual Administrative Assistance in Tax Matters in order to reduce tax evasion with the help of collaborated network. The review articulates those existing studies have limited their exploration within individual and economic related factors, but less focused on the other variables such as digitalization of public services, corporate social responsibility, and whistleblowing efforts. This paper also exhibits the avenues for future researchers in the subject of tax evasion.


Background
According to Organisation for Economic Co-operation and Development (2017), revenues received through income and profit taxes, social security payments, taxes on goods and services, payroll taxes, taxes on the ownership and transfer of property, and other taxes are referred to as tax revenue. Tax institutes and government authorities along with taxpayers have the potential responsibility to carry out the entire tax collection procedures without any hassle in order to make the government of a country to cover their operational as well as developmental expenditures (Sritharan et al., 2020). Tax collection is crucial to a country's ability to provide social services including health and education, necessary infrastructure such as power and roads, and other public goods . To make it smooth, The Global Tax Program (GTP) was launched by the World Bank to provide advisory services and technical assistance aimed at improving tax institutions and generating revenues in a fair and efficient manner at both the international and domestic levels (World Bank, 2021). Looking at global tax issues at a common glance is challenging for world tax organisation due to difference in its practices across countries. In comparison to a typical developed country, which collects 40% of GDP in taxes, a typical developing country only collects just 15% of GDP in taxes (International Monetary Fund, 2018). However, organisation such like Financial Action Task Force (FATF) sets international anti-money laundering standards and other related financing measures to prevent global monetary leakage (Financial Action Task Force, 2021). The above-mentioned measures are combats made by countries and world organisation to eradicate tax evasion, which is an intentional way of tax non-compliance.
A careful observation of literatures related to tax evasion shows that studies investigating tax evasion began evolving in the recent years only. Studies continuously exploring factors related to individual as well as tax authority but synthesising the past studies on tax evasion has not been widely carried out. However, latest studies evolving from west part of the world looking at a different perspective. It could be noticeable that new variables related institution are under testing to measure the impact they make on tax evasion. As a result, there will be minor difficulties in identifying the research gap and selecting the appropriate variable for future research. Existing and new variables adoption currently need to be reviewed to direct future researchers. Therefore, this systematic literature review article endeavours the variables studied so far across the world and intend to summarise the findings to identify the research gap. Eventually, identification of gaps will assist the researchers to draw future research avenues as well. This review article intends to choose the time frame between 2010 and 2022, roughly a decade. It is because in year 2010, Organisation for Economic Co-operation Development (OECD) established the Convention on Mutual Administrative Assistance in Tax Matters, which allows 130 countries to exchange of information related tax issues (OECD, 2021). This article reviews the literature, right after the agreement formed by OECD, and form the following objective for this paper.
Therefore, the objective of this systematic review paper is as follows.
• To synthesis the existing literature on the subject of tax evasion, • To explore the impact trend made by main variables on tax evasion.
• To identify the research gaps and direct future research avenues in the subject of tax evasion.
This paper will explain the background of tax evasion and the common variables clusters from the previous studies. Then, it describes the methodology adopted to complete this review article. Finally, this article outlines the findings with discussions, identifies the research gaps and point outs the future research directions.

Tax Evasion
Tax evasion and fiscal corruption have been long ubiquitous throughout history. The term "tax evasion" encompasses a wide range of activities by those who are unwilling to pay their fair share of taxes (Muhrtala & Ogundeji, 2013;Owusu et al., 2019). It is an attempt/act of breaching the law with the sole intent of lowering taxes. Understating income, overstating deductions, and manipulating financial documents are all instances of tax evasion strategies (Alm et al., 2019;Mughal, 2012;Ozili, 2020). Nonetheless, the amount of income lost as a result of tax evasion may be huge in any country. Tax evasion has become prevalent and inexorable around the world over the last decade, and regulators have been unable to find a solution to this expanding problem (Ali, 2018;Dewi, 2019;Nurunnabi, 2018), refer to Figure  1.

Individual factors
Most tax evasion studies look at individual behaviour in the context of evident (Alm et al., 2019). Some of the individual related factors are moral, trust, attitude, perception, intentionality, awareness, culture, religiosity, knowledge, and education. The individual income tax is the most common lens through which these acts are examined, and most theoretical and empirical work on tax evasion has concentrated on the individual income tax (Efeeloo and Dick, 2018;Kumi-Dumor et al., 2022;Mansor and Gurama, 2016;. Individuals can avoid paying income taxes by underreporting their income, overstating their deductions, exemptions, or credits, neglecting to file timely tax returns, or even participating in barter to avoid paying taxes. These sorts of acts, on the other hand, can definitely be taken in different taxes. In the meantime, firms might, for example, underreport income, exaggerate deductions, or fail to submit tax returns in the corporate income tax, just as individuals can in the individual income tax.

Economic Factors
Economy related factors in the literature are tax rate, financial constraints, income level, tax burden, corruption, economic structure, audit, penalty, and unemployment. By way of illustration, using the formal model of Allingham and Sandmo, Lefebvre et al. (2015) demonstrated that tax compliance cannot be addressed solely by the risk of deterrence and economic factors. On the other hand, Richardson (2016) states that non-economic factors have a greater influence on tax evasion than economic factors. The early models, such as the Allingham and Sandmo model and the Yitzhaki model, were typically restricted to the pure economic causes of tax evasion and neglected to take into account the broader social context (Molero & Pujol, 2012;. The Allingham-Sandmo study estimates a substantially lower compliance percentage than what we encounter. Next, corruption and tax evasion are both described as prevalent issues. Corruption is a type of dishonest or a criminal offence committed by an individual or corporation in a position of power and authority in order to get unlawful advantages or misuse power for personal benefit (Amoh and Ali-Nakyea, 2019; Khlif and Amara, 2019;Litina & Palivos, 2011). Individual citizens decide how much of their income to submit to the tax authorities in order to balance their consumption and expenditure (Ali, 2018). Similarly, politicians decide how much of the public budget to speculate in order to balance a comparable transaction. Finally, unemployment is defined as those above a certain age who are not in paid job or self-employment but are currently looking for work during period (Amoh and Adafula, 2019;Cebula and Feige, 2011;Tabandeh & Tamadonnejad, 2015). According to research, unemployment is the primary source of the shadow economy.

Other Factors
Other factors apart from the above mentioned economic, and non-economic factors, are used by very latest studied on tax evasion. Literature review presents some of the variables such as impact made by digitalisation of government services, corporate social responsibility (CSR), and whistleblowing. First, governments throughout the globe have followed the private sector in utilizing the internet to engage with their residents in recent decades, realising that internet technology may simplify government services and boost their efficiency (Uyar et al., 2021). E-government is becoming a more essential measure of good governance and among the most important methods of gauging the amount of digital transformation of public services (Shokrkhodaei, 2018). By simplifying tax procedures, filing systems, and tax payments through electronic services, the degree of compliance in taxes is increased (Raikov, 2021). Information technology indicators include the availability of information technology, the usage of information technology, the ease of access to information, and the availability of information technology specialists (Purwanto & Indrawan, 2020). Next, corporate social responsibility (CSR) is a self-regulating business model that assists a firm in being socially accountable to itself, its stakeholders, and the general public (Montenegro, 2021). The importance of public tax reporting is increasing transparency, promoting confidence and credibility in business tax procedures and tax systems, and allowing stakeholders to make informed decisions regarding the entities' tax positions. Finally, a whistle-blower is someone who discloses knowledge or action within a private, public, or government entity that is unlawful, immoral, illicit, dangerous, fraudulent, or abusive of public funds. The implementation of whistle-blower systems raises the possibility of detection by adding uncertainty to the likelihood of being audited (Masclet et al., 2019).
The following section will describes the methodology adopted to complete this review article.

Methodology
This article adopted the systematic literature review methodology to review and analyse articles related to corporate tax avoidance.    The above Table1, Table 2, and Table 3 exhibit the number of articles chosen for the purpose of review, the variables chosen by the studies and the number of citations they earned as per March 2022. All the articles listed above are categorised based on the country of sample collection. Tables clearly shows that many articles focusing tax evasion were published from few numbers of countries such as Indonesia, Malaysia, Palestine, Ghana, Nigeria, France, Greece, Italy, United States and United Kingdom. According to Indonesian studies, the common factors chosen are falls under individual factors such as taxpayers' awareness, tax morale, ethical perception, and culture as well as tax authority related factors such as fairness, justice, system, fraud detection, and law enforcement. Indonesian studies mainly looking at the impact made by the individual factors of a taxpayer and the impact made role of tax authorities. Meanwhile, Malaysian based studies focused on economic related factors impact upon tax evasion. Most of the Malaysian articles closely tested the economic related factors such as inflation rate, unemployment rate, tax burden, and tax rate. Few studies focused on the role of tax authority or tax authority related factors impact made on tax evasion. Palestinian based studies focusing tax evasion variables related to tax authority or enforcement such as probability of detection and penalty rate, which indicates that Palestinian articles looked at the penalty imposition impact towards tax evasion. Some sort of similarities could be seen among African Studies with Asian studies, in which Ghanian and Nigerian studies focused more on economic factors such as tax burden, unemployment, and income level. Little focuses were given to corruption, meanwhile, Pakistani studies looked at the impact made by corruption towards tax evasion. A thorough review of literature helped to observe many comparative studies or cross-country studies looking at factors impact upon tax evasion. Apart from the above-mentioned factors, some of the cross-country studies reveal new variables impact made upon tax evasion. For instance, some studies closely looked at how corporate social responsibility (CSR), religiosity, strength of auditing and reporting standards, and taxpayers' egoism impact the existence of tax evasion. However, studies from United States and United Kingdom looking at the impact made by governance structure, notably the impact made by owners or managers who from highly corrupted countries on tax evasion. Retrieving literatures related to tax evasion clearly indicates that publication started to rise from the beginning and reached a peak level between the years 2018 to 2019. Thereafter, a subsequent reduction in publication related to tax evasion could be noted in the literature database. Table 4 shows the selected articles for the last ten years, in which many articles published between the year 2016 to 2019 could be accessible. For the purpose of drafting this review paper, articles related to tax evasion mainly retrieved from three databases such as Elsevier (ScienceDirect), Emerald, and Springer publications (Refer to  Table 6). However, significant number of articles also employed multiple techniques to test the variables. It is also noticeable that correlation analysis and structural equation modelling also were employed among few numbers of articles. Each articles provided unique justifications for their usage of above-mentioned analysis techniques.

Year of Publication
To begin with the important discussion on individual factors, subjective norms, or norms of one's closest reference group, appear to be a particularly powerful predictor of tax evasion proclivity (Górecki & Letki, 2021;Owusu et al., 2019). When it comes to the influence of tax rates, descriptive norms are an obvious moderating element. In the presence of strong descriptive norms, tax rates have a detrimental influence on respondents' propensity for evasion. According to Richardson (2016), the primary determinants of tax evasion are education, income source, fairness, and tax morale, in addition to economic variables. The regression results of the same study reveals that the lower the amount of complexity and the greater the level of education, services income source, fairness, and tax morale, the lower the level of tax evasion. It means that tax evasion is decreased by improving taxpayers' general educational understanding (Ali, 2018;Kumi-Dumor et al., 2022;Mansor and Gurama, 2016;Zakariya'u, 2015). Additional findings reveal that taxpayers' perceptions of fairness in tax policy contribute to reductions in tax evasion. Where tax morale is strong, this provides another important curb on tax evasion (Kemme et al., 2020;Molero & Pujol, 2012;Richardson, 2016). Further findings reveal that individual tax morale may be affected by the actions of others in society, and many actions taken by people are impacted by the examples set by their peers (Lefebvre et al., 2015). Preventive campaigns against tax evasion may be more effective in significantly strengthening taxpayers' sense of duty and solidarity (Molero & Pujol, 2012). This further suggest the future researchers to employee pre-test and post-test longitudinal method to test the effectiveness of campaigns against tax evasion. To supply another findings, a study by Nurunnabi (2018), collected data from 38 Muslim-majority countries across the globe states that religious perspectives on tax evasion differ and Muslims have a religious obligation to help the impoverished. However, taxpayers with strong religious perspective may also evade taxes if the government contribute a certain portion of the paid taxes to unethical activities, such as child abortion, or war. However, no studies have explicitly addressed the question of whether it is unethical to avoid paying taxes to a bad or corrupt state.
When reviewing economic factors finding, Cebula and Feige (2012) revealed that the average tax rate, real income, interest rate, and unemployment rate all had a positive connection with unreported income, whereas the audit rate appeared to discourage tax evasion. Abdixhiku et al. (2018) found a significant positive association between tax evasion and tax rate, as well as modest influences of the macroeconomic environment. Even if a country's overall economic performance is strong, the presence of unfavourable institutional phenomena has a strong and immediate impact on the interaction between corporations and government (Abdixhiku et al., 2018;Alkhatib & Jabbar, 2017;Chiarini, 2013;Deb & Chakraborty, 2017;Masoud, 2015). In the meantime, another study by Richardson (2016) reveals that tax evasion shown to be mostly determined by the complexity in tax system. Also, the same study found that salaries and wages income subject to withholding is another key deterrent to tax evasion. Because unemployed people are part of the unreported economy, a higher unemployment rate is connected with a higher level of income tax evasion. Furthermore, employed people who are afraid of losing their jobs may under-report their earnings as a form of insurance against potential job losses (Amoh & Adafula, 2019;Cebula & Feige, 2012;Cebula, 2013).
In connection to the self-assessment system, tax authorities need ongoing socialisation, particularly of the laws and technological implementation, as well as the liabilities incurred for import transactions, to taxpayer importers (Purwanto & Indrawan, 2020). It is found that in countries with stronger national governance, substantive CSR efforts are connected with much high prevalence of tax evasion (Montenegro, 2021). Some studies have indicated that corporations that are more socially responsible are less likely to be tax aggressive, whilst others have concluded that there is a negative relationship between CSR disclosures and tax evasion and demonstrate how firms may exploit CSR disclosures to satisfy social expectations. At the same time, whistleblowing initiatives are successful at increasing declaration rates and may thus supplement more traditional audit and penalty-based procedures (Masclet et al., 2019).

Conclusion and Research Gaps
This section discusses the findings and highlights the research gaps on corporate tax evasion.

Smaller Sample Size
Most of the cross-country studies collected data from less than 50 countries only, while only few studies with large number of countries. To produce a cross-country comparative study on tax evasion, the sample size of less than 50 nations is rather small in comparison to the total number of countries in the globe, implying that the conclusions may not be conclusive (Richardson, 2016). Therefore, increased country large samples might be used in research to allow for more accurate cross-country comparisons.

Sticked with Survey Method of Data Collection
Noncompliance is a punished unlawful conduct that individuals try to conceal; directly quantifying the degree of tax evasion from the standpoint of taxpayers is an unreliable endeavour. Cebula and Feige (2012) pinpoints that survey methods are untrustworthy because respondents obviously do not want to acknowledge to unlawful activities. Taxpayer Compliance Measurement Program (TCMP) audits are the most meticulous and complete estimates of the amount and character of tax noncompliance anywhere in the world, aggregated TCMP measurements of unreported income may provide the best available benchmark for evaluating the magnitude of evasion.

Limited Studies with Economic and Non-economic Factors
To acquire a better grasp of this subject, further studies integrating economic and noneconomic factors related tax morale are required. Tax compliance must be examined within a broader framework of human behaviour, taking into account not just economic variables, but also grievances, a feeling of responsibility and solidarity, ethical standards, compassion, culture, and so on.

Limited Comparative Studies Across Different Continents
Most of the cross-country research included in this study gathered data from a single region or continent. They offer a distinct environment for investigating tax behaviour, which becomes apparent when discussing the nature of tax evasion on one particular continent (Cebula & Feige, 2012). At the same time, research concentrating on a specific group of countries, such as developing or transition countries, might yield interesting results since their ICT infrastructure and development of e-government services differ from those of established ones.

Limited Studies with Time Series Estimation
Comparing with measuring one particular year's unreported income, measuring multiple years' unreported income would assist the future researchers to predict the trend on how the tax evasion behaviour travel in a country. For that, time series estimate of unreported income are the best way to assess the link between tax evasion and its economic variables, such as tax rates, income, unemployment, interest rates, audit rates, and public perceptions toward the government. Cebula and Feige (2012) has used time series estimation to measure the unreported income and employed regression analysis to evaluate the relationship between tax evasion and some of the economic related factors.

Limited Usage of Methods
Thorough review of literatures suggests the importance of longitude method in testing the effectiveness of knowledge sharing sessions related to tax evasion. So far, limited studies have chosen the method of data collection, and the effectiveness of a knowledge sharing campaign could be measure through a laboratory testing only. Future researchers could employ pretest and post-test procedures to test the effectiveness of an anti-tax evasion campaign (Molero & Pujol, 2012). Or else, future study in this area should take a more longitudinal approach and examine the influence of changes in major tax evasion predictors and other significant factors on changes in tax evasion levels (Richardson, 2012).

Limited Studies Looking at Religiosity
Several studies have called for more investigation into tax evasion in Muslim nations, demonstrating that the Asia Pacific area is the world's most religiously diverse region (Ali, 2015;Illahi & Sumari, 2021;Nurunnabi, 2018;Strielkowski & Čábelková, 2015). However, no studies so far ethical and unethical perspective of taxpayers who are very much attached to religious believes. Studies in the future could explore taxpayers' perception whether they evade taxes due to unethical contribution. Contributions made by each government into each project could be presented in their annual budgets. Future researchers may highlight major contribution made by governments in their annual budgets and the test how religiosity impact the tax evasion. Future study might analyse public perceptions of government legitimacy, as well as any changes in perceptions across various religions, and the extent to which this may be a role in tax evasion, in order to investigate the generalizability of the present religiosity literature.

Limited Studies Looking at Corruption at Firms' Level
Few studies have so far added to the existing literature on the link between corruption and tax evasion at the firm level by exploring the heterogeneous influence of corruption on firmlevel tax evasion, which has not been investigated in many other countries. According to studies by Amoh, Nakyea (2019); Cerqueti and Coppier (2011); DeBacker et al (2015); Payne and Saunoris (2020), states that bribes on firm-level tax evasion are conditional on the incidence of tax evasion in a nation.