5. Conclusion
The starting point of this paper was to examine the relationship between tax evasion and subjective well-being in former communist countries. The latter are characterized by large individual engagements in undeclared work and, more importantly, mainly for survival reasons. The paper contributes to the literature on understanding tax evasion in former communist countries as well as the effect that the current context and the past legacy has on shaping the relationship between tax evasion and individual life satisfaction. Using a subjective measure of satisfaction (individual well-being) in fourteen Central and Eastern European countries we identified on average a negative relationship between tax evasion and life satisfaction. This relationship, however, showed a clear heterogeneity across individuals distinguished by their experience of the social and institutional context. This is, the social and institutional context in which individuals are embedded play an important role in mediating this negative relationship. Focusing on the role of the social and institutional context is particularly relevant in these countries, as they have gone through drastic social, economic, and institutional changes. Our findings support this by showing that social and institutional factors do matter in shaping the relationship between tax evasion and life satisfaction. More particularly, the mediating role of social capital depends on the type one has access to. Individuals engaged in various civically-oriented type of associations experience a negative correlation between tax evasion and satisfaction. Interestingly, this negative relationship becomes positive for those individuals who have access to and financially support ‘rent-seeking’ associations. Regarding the institutional factors the results indicate that individuals who believe that the government is doing a good job in providing public services, experience a negative relationship between tax evasion and life satisfaction.
