Beyond deterrence: trust, tax morale and tax compliance dynamics in Ethiopia

Purpose This study aims to explore the factors influencing tax compliance by combining the extended slippery slope framework (ESSF) with the theory of planned behavior (TPB). Tax morale is identified as a mediating element that encompasses the psychological, social and institutional aspects that influence taxpayer actions. Design/methodology/approach A structured questionnaire was used to gather data from 400 taxpayer respondents. Structural equation modeling was used to analyze the impact of coercive power and reward power, trust in tax authorities, subjective norms, perceptions of government spending and tax morale on enforced, voluntary and committed compliance. Findings The findings indicate that coercive power significantly boosts enforced compliance, whereas trust and tax morale are strong predictors of voluntary and committed compliances. The evidence indicates that the influence of reward power and government spending on taxpayer behavior is indirect. These tools improve compliance only when they are rooted within a reciprocal fiscal social contract in which institutional legitimacy and accountability bolster tax morale. Tax morale was identified as a crucial mediating factor that connects institutional trust, social norms and government performance to compliance outcomes. Originality/value This study enhances existing theories by incorporating the ESSF and TPB into a relational framework, offering empirical insights into fiscal social contract dynamics in a less-studied regional setting. This demonstrates that enforcement should be complemented by trust, fair administration and transparency. This study adds to the taxation literature by emphasizing the crucial mediating function of tax morale and offers practical advice for policymakers to improve compliance beyond mere deterrence.