Why People Evade Taxes and Make Donations at the Same Time

Note: This text was translated from German by AI / (DeepL Pro)

Uli Hoeneß evaded more than 25 million euros in taxes—and at the same time made five million euros in donations to charitable organizations such as “Ein Herz für Kinder” and others. Other celebrities, such as Lionel Messi and Cristiano Ronaldo, exhibited similar behavior: Not only did they distribute money received from the government to organizations of their choice, but they also took a personal risk in doing so. According to Prof. Dr. Hans-Peter Grüner of the University of Mannheim and Prof. Dr. Sebastian Siegloch of the University of Cologne, a purely economic perspective is insufficient to explain this complex phenomenon. The authors therefore introduced an additional criterion: it is the lack of political “congruence” that leads to behavior that appears irrational at first glance. This is demonstrated by their study, which was published in late September on the website of the Centre for Economic Research and Policy Analysis (CEPR).

To explain the simultaneous occurrence of tax avoidance and a willingness to donate, the economists introduced “congruence” as a central factor in their theoretical model. This refers to the alignment between a person’s personal preferences and their perception of the government’s political and administrative measures. Congruence is high when people share similar political preferences regarding public spending with the government and trust its administrative capabilities. It is low when that trust is lost.

From the scientists’ perspective, the key to understanding this seemingly irrational behavior lies in whether people view taxes and donations as interchangeable: Those who are congruent and satisfied with politics are happy to pay taxes and have less incentive to evade them. This is because simply paying taxes can generate a positive feeling—a so-called “warm glow.”
Those who are at odds with politics, on the other hand, are more inclined to take control of where their contributions go—and prefer to make donations rather than pay taxes to achieve the same positive feeling. For politically incongruent taxpayers, therefore, the principle of the interchangeability of taxes and donations does not apply. They prefer the impact of private donations and would rather decide for themselves where their money goes.

“Our findings suggest that a combination of traits determines who is prone to tax evasion, including rule-following, a willingness to contribute to the community, and political congruence,” explains Prof. Dr. Hans-Peter Grüner. “Tax evasion can be the result of low social motivation, but it does not have to be. Those who are inherently highly socially motivated but reject the government’s policies may be inclined to both evade taxes and make donations.”

Based on this, the authors also discuss how tax evasion can be reduced. They see one possibility in greater democratic participation and measures that strengthen political alignment between taxpayers and policymakers. This could include elements of direct democracy or a stronger earmarking of taxes for specific categories of spending. As an example, the researchers cite the Italian “Cinque per mille” system. Under this system, taxpayers can allocate a portion of their income tax to a charity of their choice. For their analysis, the researchers evaluated survey data from the “World Values Survey,” a global study of values and attitudes. The seventh wave of the 2024 edition includes approximately 120,000 respondents from 80 countries.

You can find the original publication Paying Taxes Like Uli Hoeneß — Tax Evasion, Charitable Giving, and Political Congruencehere.