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Tax Compliance Under Different Institutional Settings in the EU: An Experimental Analysis

Author

Listed:
  • Stefania Ottone
  • Ferruccio Ponzano
  • Giulia Andrighetto

Abstract

In this paper we study how people from different European countries would react, in terms of tax compliance, to institutional changes. We choose an experimental setting and we focus on two features of the tax system – efficiency and tax rate. We develop our analysis in three countries characterized by different systems: Italy, Sweden, UK. The main finding is that participants from different countries react with the same intensity to efficiency changes but not to increases in the tax rate. In all countries tax compliance decreases as tax rate increases, but the reaction is stronger in Italy and softer in UK. Policy implications – mostly focused on fiscal harmonization - follow.

Suggested Citation

  • Stefania Ottone & Ferruccio Ponzano & Giulia Andrighetto, 2015. "Tax Compliance Under Different Institutional Settings in the EU: An Experimental Analysis," Working Papers 307, University of Milano-Bicocca, Department of Economics, revised Aug 2015.
  • Handle: RePEc:mib:wpaper:307
    as

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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper307.pdf
    File Function: First version, 2015
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    References listed on IDEAS

    as
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    4. Lewis, Alan & Carrera, Sonia & Cullis, John & Jones, Philip, 2009. "Individual, cognitive and cultural differences in tax compliance: UK and Italy compared," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 431-445, June.
    5. Alm, James & Torgler, Benno, 2006. "Culture differences and tax morale in the United States and in Europe," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 224-246, April.
    6. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
    7. Lago-Peñas, Ignacio & Lago-Peñas, Santiago, 2010. "The determinants of tax morale in comparative perspective: Evidence from European countries," European Journal of Political Economy, Elsevier, vol. 26(4), pages 441-453, December.
    8. Kirchler, Erich & Maciejovsky, Boris, 2001. "Tax compliance within the context of gain and loss situations, expected and current asset position, and profession," Journal of Economic Psychology, Elsevier, vol. 22(2), pages 173-194, April.
    9. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
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    More about this item

    Keywords

    tax compliance; fiscal harmonization; cross-country comparison; efficiency; tax rate;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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