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Happiness and Tax Morale: an Empirical Analysis

  • Diego Lubian

    ()

    (Department of Economics (University of Verona))

  • Luca Zarri

    ()

    (Department of Economics (University of Verona))

This paper presents empirical evidence that \tax morale" - taxpayers' intrinsic motivation to pay taxes - constitutes a new determinant of happiness, even after controlling for several demographic and socioeconomic factors. Using data on Italian households for 2004, we assess the strength of tax morale by relying on single items as well as composite multi-item indices. Our main result that scal honesty generates a higher hedonic payo than cheating is in line with Harbaugh et al. (2007)'s neuroeconomic nding. Further, it sheds light on the well-known \puzzle of compliance", that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low: tax compliance is less puzzling once we show that not only it is materially costly, but also provides sizeable non-pecuniary bene ts that make it rewarding in itself.

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Paper provided by University of Verona, Department of Economics in its series Working Papers with number 04/2011.

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Length: 39
Date of creation: Mar 2011
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Handle: RePEc:ver:wpaper:04/2011
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