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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.

Suggested Citation

  • Guglielmo Barone & Sauro Mocetti, 2009. "Tax morale and public spending inefficiency," Temi di discussione (Economic working papers) 732, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_732_09
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    References listed on IDEAS

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    More about this item

    Keywords

    tax morale; public spending inefficiency;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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