Is There any Long-term Association Between Tax Evasion and Human Development?: Evidence from OECD Countries

This study aims to find the role of tax evasion on human development. It is claimed that tax evasion has a negative effect on tax revenues, which in turn causes people to not be able to access public services such as health and education efficiently. Further, people cannot benefit from social aids in a sufficient way. While government-provided public services are supposed to increase living standards, limitations on the access to them are expected to worsen human development, and deteriorate poverty. In line with the objective to find a potential long-run impact of tax evasion on human development, human development index (HDI) and size of tax evasion as percentage of GDP data of 36 OECD countries over the period of 1999 to 2010 are utilized. By conducting panel unit root and cointegration tests, two series are checked for stationarity and cointegration. Long-run coefficients of panel dynamic OLS (PDOLS) estimation reveal that tax evasion has a strong negative effect on human development in the long run. High level of poverty is also a side effect of the linkage between tax evasion and human development