On the connection between cultural values and personal income taxation

The article explores the relationship between Hofstede’s cultural dimensions and personal income taxation, as it is, what was never done in the scientific literature. It briefly describes the current level of scientific discourse and history of thought development in this problem field, forming the theoretical basis for substantiating the assumed relationship. Using theoretical reasoning as well as comparative quantitative methods (logistic and linear regression analysis), the paper shows the connection between some of Hofstede’s cultural dimensions (power distance, individualism) and the establishment of progressive income taxation and top marginal tax rates. It is found that lower scores of power distance are associated with progressive income taxation, as well as higher tax rates. In addition, some potential mechanisms underlying this relationship are discussed. It is emphasized that cultural values can have two levers of influence on tax policy (bottom-up and top-down), since both the politicians responsible for designing tax systems and the citizens who shape the redistribution demand carry the national cultural values. The sample under study includes 115 countries at different levels of economic development.