Approaches From the New Institutional Economics to Maximizing Voluntary Compliance in the Republic of Moldova and EU Countries

Abstract

This paper examines the role of institutional design in fostering voluntary tax compliance, drawing on insights from the New Institutional Economics (NIE), Public Choice theory, and transaction cost economics. Beginning with Buchanan’s conceptualization of the necessity of the state in The Limits of Liberty, it highlights how public institutions can reduce transaction costs, thereby creating incentives for benevolent compliance among economic agents. The analysis incorporates Coase’s framework of transaction costs and North’s notion of open-order institutions, showing how well-structured fiscal systems transform state institutions into credible and efficient enforcers of public finance. Further, the paper explores the relationship between institutional legitimacy and revenue outcomes, arguing that higher public trust correlates with greater tax compliance, as evidenced by Scandinavian countries, whereas low legitimacy, as in the Moldovan case, hinders revenue collection. Finally, the European Union is presented as a supranational mechanism that harmonizes fiscal policies across member states, reducing administrative burdens and evasion while maximizing compliance. Overall, the paper underscores the critical importance of institutional legitimacy and coordinated policy design in achieving efficient public finance outcomes. UDC: 336.225.63:338.22(478+4); JEL: H20, H26, D02, D73