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Fiscal Illusion and Fiscal Obfuscation:An Empirical Study of Tax Perception in Sweden

Author

Listed:
  • Sanandaji, Tino

    () (Research Institute of Industrial Economics (IFN))

  • Wallace, Björn

    () (Stockholm School of Economics)

Abstract

In this paper we present survey evidence suggesting that there exists a sizeable fiscal illusion amongst the general public in Sweden. Respondents in a nation-wide and representative survey systematically underestimate the share of an ordinary worker’s income that is transferred to the public sector. Furthermore, we make a theoretical distinction between tax illusion and fiscal obfuscation, a proposed novel type of fiscal illusion. It has previously been assumed that fiscal illusion derives from a fragmentized tax system with many small, and largely invisible, taxes which tend to be ignored or underestimated by the tax payers. We hypothesize that this systematic bias could in addition emanate from misapprehensions of the real incidence of a tax. Evidence is presented that this could apply even when taxes are few and large, contrary to the tax complexity hypothesis. When this misperception derives from seemingly deliberate tax design and tax labeling, as appears to be the case with the payroll taxes in Sweden, we call it fiscal obfuscation.

Suggested Citation

  • Sanandaji, Tino & Wallace, Björn, 2010. "Fiscal Illusion and Fiscal Obfuscation:An Empirical Study of Tax Perception in Sweden," Working Paper Series 837, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0837
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    References listed on IDEAS

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    Cited by:

    1. Paulo Reis Mourao, 2008. "Towards a Puviani’s Fiscal Illusion Index," Hacienda Pública Española, IEF, vol. 187(4), pages 49-86, December.
    2. Mourão, Paulo, 2007. "Towards a Fiscal Illusion Index," MPRA Paper 9760, University Library of Munich, Germany, revised 28 Jul 2008.

    More about this item

    Keywords

    Fiscal Illusion; Fiscal Obfuscation; Tax Illusion; Tax Labeling; Tax Structure; Personal Income Taxation;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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