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TOWARDS A SUSTAINABLE TAXATION POLICY: HOW TAXES CAN INFLUENCE HAPPINESS?
Abstract
This research aims to identify the effects that different types of taxes have on happiness, considering that the main feature of the tax systems should be related to being fair, otherwise they fail to be sustainable. For this, the question arises on the fact that happier taxpayers would pay higher taxes or not. This study will reveal, through regression analysis, the effect taxes have on various indicators of happiness, over the period 2009-2016. In order to highlight whether or not the level of taxes is directly influencing happiness, the analysis will compare the results from countries located in the North of Europe with those from the South of Europe. The tax policy will be reflected by tax on income, tax on revenue, tax on property, and tax on goods and services, while the proxies for happiness are social support, healthy life expectancy at birth, freedom to make life choices, perception of corruption, confidence in national government, and democratic quality. These happiness indicators are employed as they express the national average life evaluations. Results indicate several differences depending on the geographic location, emphasising the fact that tax on income has a positive influence on happiness proxies mostly in Northern countries, while indirect taxes such as taxes on goods and services have an indirect influence on happiness for the countries analysed. The statistics do not prove a strong influence from tax on property on the happiness proxies, although most coefficients suggest that taxpayers would be happier with lower property taxes. Even though the level of corruption is high in the Southern countries, they are trying to improve the level of democracy and, over the last years, they succeeded, improving themselves from the economic and social point of view. Another difference between regions is related to the Confidence in national government, which is positive in the Northern countries. Accordingly, the individuals trust the national government to make the right decisions for their country and pay higher taxes. However, the Southern countries reflect the opposite, as higher taxes on revenue affect the citizensВ’ confidence in the government.
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