More bang for your buck: tax compliance in the United States and Italy

Abstract

I investigate the relationship between perception of public institutions and tax compliance using a large tax compliance laboratory experiment conducted in Italy and the United States. In the first test, I conduct a simple tax compliance game to uncover that given the exact same decisions, contributions to the public good do not differ between Italy and the United States. Second, I ask participants to pay taxes to their national government, pension fund and fire department. In these rounds, behaviours diverge with Italian participants complying significantly less than Americans. Theoretically, I provide evidence demonstrating that how individuals perceive their institutions is a crucial component of the tax compliance decision. Methodologically, I provide a unique experiment, which can help us to better explain crosscountry variation in tax compliance, by asking subjects to make country-specific tax decisions.

Analysis of the Tax Compliance in the EU: VECM and SEM

“…These results are in line with the literature. For example, the positive and important impact on compliance from trust in the authorities has been found in various works [3,7,[9][10][11][14][15][16][17][18][19][20][21][22][23]. The trust variable was related to the voluntary compliance behavior, which may be more effective than the enforced compliance behavior.…”

“…The relationship between tax authorities and taxpayers has a significant effect on tax behavior [8]. The trust variable is positively associated with tax compliance [14][15][16] and has an important impact [7,[17][18][19][20][21][22][23]. Participation in tax non-compliance increases when trust is low [24].…”

Tax compliance and social desirability bias of taxpayers: experimental evidence from Indonesia

“…The heterogeneity among them must be acknowledged in explaining individuals' tax compliance behaviours. Indeed, many empirical studies show that tax compliance behaviour varies across citizens depending on their demographic attributes and socioeconomic characteristics, including age, gender, income, and education (Kastlunger et al 2010;Lago-Penas and Lago-Penas 2010;Russo 2013;Brockmann et al 2016;Hofmann et al 2017), culture (Alm and Torgler 2006;Kountouris and Remoundou 2013), employment status and religion (Lago-Penas and Lago-Penas 2010), and trust in and perceptions of government (Kirchler et al 2008;Kogler et al 2013;Jimenez and Lyer 2016;Batrancea et al 2019;D'Attoma 2020).…”

Regional Variation in Tax Compliance and the Role of Culture

“…This research note responds to calls for a finer-grained investigation of culture's impact on taxpayers by looking at within-country differences (Torgler, 2016;D'Attoma, 2017D'Attoma, , 2019D'Attoma, , 2020. Italy offers a compelling case: the south accounts for a disproportionate amount of the country's 30% tax gap, which cost Italy €107.5 bil-lion in 2016 (Salzano & Speciale, 2019).…”

“…2 Although both regions are subject to many of the same national formal institutions, Emilia Romagna and Campania differ significantly in their perceptions of fairness and legitimacy in government institutions (D'Attoma, 2019;D'Agostino et al, 2021). 3 If culture affects tax compliance and responsiveness to varying tax policies, subjecting both groups to the same tax compliance game should result in statistically 1 Other explanations on why southern Italians evade more taxes than northern Italians in the field includes low enforcement and/or low tax morale stemming from distrust in government and dissatisfaction with poor quality public services D'Attoma, 2018D'Attoma, , 2020). 2 Some might question whether Emilia Romagna and Campania are representative of northern and southern regions.…”