TAX CULTURE IN TAX RISK MANAGEMENT: INSTITUTIONAL-BEHAVIORAL MECHANISM AND AN EFFECTIVENESS EVALUATION MODEL

Abstract

The purpose of this study is to substantiate the role of tax culture as a systemic institutional and behavioral factor in tax risk management and to develop an integrated approach to evaluating its impact on tax policy effectiveness within a multilevel economic framework. The research is based on a combination of institutional, behavioral, and systems approaches. Structural-functional analysis, comparative analysis, and an indicative method were applied to identify relationships between tax culture, taxpayer behavior, and tax risks. An index-based approach was used to formalize tax culture through a composite indicator integrating proxy variables such as tax gap, shadow economy, trust in institutions, and voluntary tax compliance. The study demonstrates that tax culture significantly determines the nature of taxpayer behavior and the level of tax risks. A causal relationship chain “tax culture - behavior - risks - policy effectiveness” is substantiated. The proposed Tax Culture Index (TCI) enables the quantitative assessment of tax culture and provides a tool for identifying changes in behavioral patterns and risk dynamics. The results confirm that higher levels of institutional trust and perceived fairness contribute to lower tax evasion and reduced shadow economy. The novelty of the research lies in the development of an integrated institutional-behavioral model of tax culture and its incorporation into the system of tax risk management. Unlike existing approaches, the study provides a formalized index-based methodology for measuring tax culture and links it directly to tax risk profiles and policy outcomes. The proposed approach can be used by public authorities to improve tax administration and develop risk-oriented tax policies. The integration of tax culture indicators into decision-making processes allows for more efficient allocation of administrative resources, reduction of compliance costs, and enhancement of voluntary tax compliance. Tax culture is a fundamental determinant of tax system effectiveness and should be considered a core element of modern tax risk management. Its integration into policy design enables a shift from reactive to proactive governance, contributing to sustainable fiscal performance and reduced tax-related risks.