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The effect of tax enforcement on tax morale

Author Info

  • Antonio Filippin

    ()

    (University of Milan)

  • Carlo V. Fiorio

    ()

    (University of Milan)

  • Eliana Viviano

    ()

    (Bank of Italy)

Abstract

In this paper we argue that tax enforcement is an additional contextual factor affecting tax morale, one of the most important determinants of tax compliance. By using a unique dataset that merges a representative sample of Italian households with administrative data on tax enforcement, we find first that tax morale is positively correlated with tax enforcement. Second, to deal with possible endogeneity of tax enforcement, we show that results are confirmed in an IV specification using the change in the tax gap at the provincial level as an instrument for tax enforcement. Finally, we provide evidence that the impact of tax enforcement and social environment is stronger at low quantiles of tax morale. Our results show that apart from lowering the expected value of tax evasion, tax enforcement has an additional and indirect effect on tax compliance through its effect on tax morale.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 937.

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Date of creation: Oct 2013
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Handle: RePEc:bdi:wptemi:td_937_13
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Keywords: tax morale; tax enforcement; tax gap;

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Find related papers by JEL classification:
  • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
  • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
  • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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Cited by:

  1. Uwe Dulleck & Jonas Fooken & Cameron Newton & Andrea Ristl & Markus Schaffner & Benno Torgler, 2012. "Tax Compliance and Psychic Costs: Behavioral Experimental Evidence Using a Physiological Marker," CREMA Working Paper Series 2012-19, Center for Research in Economics, Management and the Arts (CREMA).
  2. Jana Friedrichsen & Dirk Engelmann, 2013. "Who Cares for Social Image? Interactions between Intrinsic Motivation and Social Image Concerns," CESifo Working Paper Series 4514, CESifo Group Munich.
  3. Friedrichsen, Jana, 2016. "Signals sell: Designing a product line when consumers have social image concerns," Discussion Papers, Research Unit: Market Behavior SP II 2016-202, Social Science Research Center Berlin (WZB).
  4. Lorenzo Burlon, 2014. "Public expenditure distribution, voting, and growth," Temi di discussione (Economic working papers) 961, Bank of Italy, Economic Research and International Relations Area.

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