Self-Concept Maintenance and Tax Evasion

I analyze quasi-experimental data on tax evasion reports collected by the Italian webpage evasori.info. I find that a bigger number of reports per unit of irregular activity, which indicates a stronger tax morale, is negatively correlated with the median reported amount. I show that this evidence is consistent with a model of self-concept maintenance, where illegal actions are categorized more easily, in the sense that they are consistent with a positive self image of honesty, if they involve small amounts of money. The data suggest that a stronger individual and social attitude towards evasion makes this categorization more difficult, lowering the threshold below which evasion is acceptable. The result is tax evasion reports of smaller amount. I also propose a Montecarlo exercise to estimate this threshold and its dependence on tax morale.