The relationship between legal traditions, financial systems and tax avoidance
Tax avoidance has become a growing problem for countries in recent years. Multinational companies are exploiting differences in tax laws between countries to pay significantly lower taxes. In light of this issue, the objective of this study was to investigate whether the level of tax avoidance is influenced by the legal tradition and the type of financial system of a country, while also examining the relationship between them. To conduct this study, a comprehensive sample of relevant literature, consisting of 57 papers, was examined. Moreover, a relationship between common law, market-based economies, and a higher level of tax avoidance was expected. However, the results only confirm a strong association between common law and market-based countries, as well as between common law and a lower level of tax avoidance. Indeed, it cannot be convincingly identified a relationship between financial systems and the degree of tax avoidance. These findings hold significant implications for legislators and policymakers as they highlight the crucial role of a country's legal system in both the economy and the issue of tax avoidance, offering valuable guidance on structuring, developing, and implementing new laws.
Faculteit der Managementwetenschappen