Tax revenue is crucial for development, yet non-compliance persists in developing countries. Despite the increasing adoption of self-assessment systems (SAS) that rely on voluntary compliance, the role of tax morale remains understudied. This study investigates the relationship between tax morale and compliance among 275 Malawian firms, employing a novel double LASSO methodology for variable selection and estimation. The findings reveal a strong positive association between tax morale and compliance (coefficient＝0.2377, p ＜0.01), with estimates higher than previous studies. This can be attributed to firm-level data, which provides a more accurate measurement of taxpayer attitudes and behaviors than prior research that primarily surveyed the general population. Key mechanisms underlying this relationship include perceptions of tax system fairness and satisfaction with public services, such as electricity, water, and sanitation. The study highlights the importance of tax morale in voluntary systems and suggests that improving public service provision and enhancing tax system fairness can significantly boost tax revenue in Malawi.
Gerald CHIZONDA (2025) studied this question.