Investigating the Impact of Financial Freedom and Investment on Tax Evasion: A Quantile Regression Approach

Taxes play a key role in combining government revenues and can help governments achieve the three goals of resource allocation, revenue distribution, and economic stability. There are several factors that affect tax evasion, one of the most important of which is the openness of markets (financial freedom and freedom of investment). Therefore, in this study, the effect of financial freedoms and investment on tax evasion in the period 2000-2020 has been studied using the quantitative regression method. The results of model estimation show that higher monetary freedom (low inflation), financial freedom and investment freedom have negative, positive and negative effects on tax evasion, respectively. Also, the impact of property rights on tax evasion is negative and significant, and the guarantee of personal property by the government has reduced the rate of tax evasion. In addition, rule of law also has a significant negative impact on tax evasion. Because the rule of law is high, it increases people's confidence in the strict implementation of laws, especially tax laws, and reduces the possibility of tax evasion. At the significance level of 5%, the impact of government spending and the agricultural sector share variable (percentage of GDP) on tax evasion was positive but not statistically significant. In contrast, the effect of religion (percentage of Muslim population) and unemployment rate on tax evasion are negative, positive and significant, respectively.