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Tax morale and public spending inefficiency

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  • Guglielmo Barone

    ()
    (Bank of Italy)

  • Sauro Mocetti

    ()
    (Bank of Italy)

Abstract

Tax evasion is a widespread phenomenon and encouraging tax compliance is an important and much debated policy issue. Many studies have shown that tax cheating has to be attributed to a considerable extent to the tax morale of taxpayers. The aim of the present paper is to shed light on the relationship between the taxpayer and the public sector. Specifically, we investigate whether public spending inefficiency shapes individual tax morale. Combining data from Italian municipalities’ balance sheets with individual data from a properly designed survey on tax morale, we find that the attitude towards paying taxes is better when resources are spent more efficiently. This does not appear to be due to some confounding factors at the municipality level or to spatial sorting of citizens. It is also robust to alternative measures of both inefficiency and tax morale.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 732.

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Date of creation: Nov 2009
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Handle: RePEc:bdi:wptemi:td_732_09

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Keywords: tax morale; public spending inefficiency;

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