Life Satisfaction and Tax Morale in Azerbaijan: Mediating Role of Institutional Trust and Financial Satisfaction

This paper examines the relationship between life satisfaction (measured as the self-reported satisfaction of each individual with their past life and goal achievements) and tax morale
(measured as the likelihood of an individual’s intrinsic motivation to pay taxes). Using a large-scale
survey data-set from Azerbaijan, it is documented that life satisfaction is positively associated with
tax morale. Life satisfaction plays a significant role in increasing tax compliance practices. It is also
important to note that there is a positive mediating effect of life satisfaction on tax morale through
financial satisfaction and institutional trust. In line with our hypotheses, the results of a series of
analyses remain robust to different models. These results imply that a higher level of life satisfaction
may increase the proportion of individuals who report the highest tax morale in Azerbaijan. Our
findings have policy implications for Azerbaijan and other governments aiming to alleviate high
levels of tax evasion.