The Role of Legitimacy in Shaping Tax Morale: The Case of Hungary

Building on Margaret Levi’s theory of fiscal contract (1997), this article argues that people are primarily motivated to pay tax by governmental legitimacy. According to Levi, the agreement assumes the provision of collective services which focus on the needs of society; if services respond effectively to public interests, taxpayers reimburse them with their taxes. Put another way, under the fiscal contract, as long as the government abides by its own terms, legitimacy guarantees taxpayers that the government will draw up policy frameworks for cooperation. Thus, legitimacy is the main tool used by the government to influence citizens’ moral considerations in taxpaying, that is, their tax morale. Based on Fritz W. Scharpf’s thesis of input-oriented and output-oriented legitimacy (1999), the article investigates the impact of legitimacy on tax morale through five governmental tools: government communication, channeling public opinion (input-oriented legitimacy), quality of collective services, legal frameworks, and implementation (output-oriented legitimacy). However, the case of Hungary also highlights on the role of the nature of a political regime what also has an impact on the effectiveness of governmental legitimacy. Results show that the centralization of the tax administration and the exclusion of citizens from flagship collective services in the Hungarian hybrid regime could make the role of important legitimacy tools insignificant in shaping citizens’ tax morale. Building on this argument, this article provides a new framework to investigate the role of governmental legitimacy and the nature of a political regime in shaping tax morale.