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The Relevance of the Theory of Fiscal Illusion. The Case of the Italian Tax System

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  • Roberto Dell'Anno
  • Vincenzo Maria De Rosa

Abstract

This work analyses the phenomenon of fiscal illusion (Puviani, 1903) in the context of the Italian tax system. Financial (or fiscal) illusion refers to mechanisms which cause a cognitive alteration on the part of the taxpayer regarding the evaluation of the costs and benefits of public policies. Puviani (1903) was the first to classify the different types of financial illusions. He highlighted the main strategies used to hide the real costs of financing public goods and services through taxes (illusions on revenue) or to overestimate their usefulness (illusions on expenditure). The main conclusions of the work are that: (i) from a methodological point of view, there is a connection between Puviani?s theory of fiscal illusion and some of the assumptions of the behavioral approach and (ii) from an operational point of view, it is a useful tool to understand the motives that could have inspired several recent taxes and legislative measures within the Italian tax system. These results support the relevance of Puviani?s theory to the contemporary theory and practice of public finance.

Suggested Citation

  • Roberto Dell'Anno & Vincenzo Maria De Rosa, 2013. "The Relevance of the Theory of Fiscal Illusion. The Case of the Italian Tax System," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2013(2), pages 63-92.
    • Handle: RePEc:fan:spespe:v:html10.3280/spe2013-002004
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    1. Antonio Abatemarco & Roberto Dell’Anno, 2020. "Fiscal illusion and progressive taxation with retrospective voting," Economic and Political Studies, Taylor & Francis Journals, vol. 8(2), pages 246-273, April.
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    3. Roberto Dell’Anno & Jorge Martinez-Vazquez, 2019. "A problem with observational equivalence: Disentangling the renter illusion hypothesis," Urban Studies, Urban Studies Journal Limited, vol. 56(1), pages 193-209, January.

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • B29 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Other

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