Periodic Reporting for period 1 - ChEATAX (Cross-Cultural Experimental Analyses of Tax Morale)
Berichtszeitraum: 2017-07-01 bis 2019-06-30
ChEATAX aims at understanding individuals' intrinsic motivation to pay taxes across cultures. Tax evasion negatively affects all societies; it occurs within a country and across countries, at the European and global levels. That is why fighting against tax evasion is important for societies and, indeed, it is one of the main political priorities for the European Commission (European Commission, 2012).
Recent research revealed that individuals’ tax compliance is not only a function of wealth level and tax rates, but also of social and cultural norms. Observational data shows that average levels of tax evasion are particularly high in Southern European countries and low in Northern European countries (Schneider, 2013). Why is that the case? Is there a different tax culture across Europe?
ChEATAX aims at investigating whether cultural differences within Italy (representing the South of Europe) and between Italy and Denmark (representing the North of Europe) can explain the North-South discrepancies in Italian and European tax compliance. It also seeks to identify other factors which can mitigate such discrepancies. One particular issue addressed in ChEATAX is whether individuals perceive immigrants as less deserving of tax-funded benefits than natives; and, if such deservingness attitudes affect individuals’ tax morale. This is a particularly salient issue in relation to the widespread political debate over immigration and the use of state benefits by immigrants.
The main objectives of ChEATAX have been pursued via cross-cultural laboratory economics experiments. At the beginning of the project, the researcher collected data throughout a set of economics experiments conducted at the Universities of Salerno in the South of Italy. As a conclusion of the project, the researcher and the project supervisor are currently analyzing data and writing papers to discuss the results of the experiment.
European Commission (2012), An Action Plan to strengthen the fight against tax fraud and tax evasion, Brussels 6.12.2012 COM (2012) 722 final.
Schneider F., & Enste D. (2013). The Shadow Economy: An International Survey. New York, NY: Cambridge University Press.
Recent research revealed that individuals’ tax compliance is not only a function of wealth level and tax rates, but also of social and cultural norms. Observational data shows that average levels of tax evasion are particularly high in Southern European countries and low in Northern European countries (Schneider, 2013). Why is that the case? Is there a different tax culture across Europe?
ChEATAX aims at investigating whether cultural differences within Italy (representing the South of Europe) and between Italy and Denmark (representing the North of Europe) can explain the North-South discrepancies in Italian and European tax compliance. It also seeks to identify other factors which can mitigate such discrepancies. One particular issue addressed in ChEATAX is whether individuals perceive immigrants as less deserving of tax-funded benefits than natives; and, if such deservingness attitudes affect individuals’ tax morale. This is a particularly salient issue in relation to the widespread political debate over immigration and the use of state benefits by immigrants.
The main objectives of ChEATAX have been pursued via cross-cultural laboratory economics experiments. At the beginning of the project, the researcher collected data throughout a set of economics experiments conducted at the Universities of Salerno in the South of Italy. As a conclusion of the project, the researcher and the project supervisor are currently analyzing data and writing papers to discuss the results of the experiment.
European Commission (2012), An Action Plan to strengthen the fight against tax fraud and tax evasion, Brussels 6.12.2012 COM (2012) 722 final.
Schneider F., & Enste D. (2013). The Shadow Economy: An International Survey. New York, NY: Cambridge University Press.
At the beginning of the project, the researcher, together with the project supervisor, programmed a set of economic experiment on tax compliance. Next, the researcher organized the experimental sessions to be conducted at the University of Salerno, and spent one week there to actually conduct them, with a total of 114 participants. The researcher started then to analyze the data, by comparing the new data collected at the lab in Salerno with the data already collected in Bologna and Copenhagen during the researcher’s previous research activities. As conclusion of the project, the researcher and the project supervisor are currently writing research papers to disseminate the results.
The results show that subjects replied in a predictable manner to changes in the classical tax parameters: redistribution rates, tax rates and audit probability. Evasion rates decrease with redistribution and audit probabilities, while increase with tax rates. Similar patterns also hold when considering the three geographical locations individually (see Figure 1). Italians were surprisingly (with respect to the prevailing national stereotypes about Italians' dishonesty) more likely to comply than Danes, and Southern Italians more likely to comply than Northern Italians. We found that males are on average more likely to evade taxes than females, both in Italy (Salerno, Bologna) and Denmark (Copenhagen); see Figure 2. On average, participants stated that cheating on tax is not justified. Figure 3 shows how participants in Bologna and in Salerno ranked the deservingness of natives and immigrants as potential welfare recipients under three conditions: as employed and fully compliant taxpayers; as employed tax evaders; or as unemployed. In all three circumstances, natives were judged more deserving of tax-funded benefits than immigrants, and we show that this has a negative impact on individuals’ tax morale in both lab locations. We are further analyzing whether ethics and beliefs about others’ tax compliance affect individuals’ evasion choices, and if these beliefs differ between lab locations.
Regarding dissemination of the results: (1) the researcher together with the project supervisor, are currently working on four works in progress; (2) we have been invited by Lukas Hakelberg (U of Bamberg) and Laura Seelkopf (LMU Munich) to write a book chapter for a Handbook on the Politics of Taxation edited by Edward Elgar Publishing; (3) we have presented ChEATAX results at the European Consortium for Political Research General Conference and the 35th Annual Conference of the European Association of Law and Economics held; (4) the researcher is building a website to increase the visibility of the project and of the results (it is under construction at the following link https://sites.google.com/view/cheatax/home).
The results show that subjects replied in a predictable manner to changes in the classical tax parameters: redistribution rates, tax rates and audit probability. Evasion rates decrease with redistribution and audit probabilities, while increase with tax rates. Similar patterns also hold when considering the three geographical locations individually (see Figure 1). Italians were surprisingly (with respect to the prevailing national stereotypes about Italians' dishonesty) more likely to comply than Danes, and Southern Italians more likely to comply than Northern Italians. We found that males are on average more likely to evade taxes than females, both in Italy (Salerno, Bologna) and Denmark (Copenhagen); see Figure 2. On average, participants stated that cheating on tax is not justified. Figure 3 shows how participants in Bologna and in Salerno ranked the deservingness of natives and immigrants as potential welfare recipients under three conditions: as employed and fully compliant taxpayers; as employed tax evaders; or as unemployed. In all three circumstances, natives were judged more deserving of tax-funded benefits than immigrants, and we show that this has a negative impact on individuals’ tax morale in both lab locations. We are further analyzing whether ethics and beliefs about others’ tax compliance affect individuals’ evasion choices, and if these beliefs differ between lab locations.
Regarding dissemination of the results: (1) the researcher together with the project supervisor, are currently working on four works in progress; (2) we have been invited by Lukas Hakelberg (U of Bamberg) and Laura Seelkopf (LMU Munich) to write a book chapter for a Handbook on the Politics of Taxation edited by Edward Elgar Publishing; (3) we have presented ChEATAX results at the European Consortium for Political Research General Conference and the 35th Annual Conference of the European Association of Law and Economics held; (4) the researcher is building a website to increase the visibility of the project and of the results (it is under construction at the following link https://sites.google.com/view/cheatax/home).
"ChEATAX is advancing knowledge by addressing four long-standing gaps in the literature:
1) The magnitude of tax evasion in Italy varies greatly between the North and the South (Santoro, 2010). However, previous experiments on tax compliance have been carried out in the North of Italy (mainly in Bologna, Milan and Rome). ChEATAX is the first cross-national experimental project that extends the analysis to the South of Italy.
2) Previous experiments on tax compliance have been carried out in the US, the UK, Sweden, and Italy (e.g. Andrighetto et al., 2016). No previous experimental studies have investigated tax morale in Denmark. ChEATAX is the first experimental project to test whether tax morale differ between Denmark and Italy.
3) In the standard model and cross-national experiments on tax evasion, the taxpayer is treated as an isolated expected utility maximizer. ChEATAX extends the standard analysis of individual compliance behavior to explore how individual decisions are affected by their beliefs about others’ compliance choices in a cross-cultural dimension.
4) In addition, ChEATAX highlights and analyses cross-cultural differences in attitudes towards immigration and gender as crucial dimensions influencing individual tax compliance behavior (Finseraas, 2008).
Regarding the impact of the project, ChEATAX’s findings can be useful for policy-makers. The first results is that subjects – even if coming from different locations – react in a predictable manner to changes in the parameter of taxation (tax rate, redistribution, audit rate). Thus, ChEATAX basically encourages policies which seek to increase detection of tax evasion. In addition, ChEATAX’s results suggest that other factors shape individuals’ tax behavior, including gender, beliefs about others’ behavior, and attitudes towards who should receive tax-funded benefits.
Andrighetto et al (2016). Are some countries more honest than others? Evidence from a tax compliance experiment in Sweden and Italy. Frontiers in Psychology.
Finseraas, H. (2008). Immigration and preferences for redistribution: An empirical analysis of European survey data. Comparative European Politics, 6(4), 407-431.
Zhang et al (2016). ""Willing to Pay?"" Tax Compliance in Britain and Italy: An Experimental Analysis. PloS one, 11(2).
Santoro, A. (2010). L'evasione Fiscale. Bologna: Mulino."
1) The magnitude of tax evasion in Italy varies greatly between the North and the South (Santoro, 2010). However, previous experiments on tax compliance have been carried out in the North of Italy (mainly in Bologna, Milan and Rome). ChEATAX is the first cross-national experimental project that extends the analysis to the South of Italy.
2) Previous experiments on tax compliance have been carried out in the US, the UK, Sweden, and Italy (e.g. Andrighetto et al., 2016). No previous experimental studies have investigated tax morale in Denmark. ChEATAX is the first experimental project to test whether tax morale differ between Denmark and Italy.
3) In the standard model and cross-national experiments on tax evasion, the taxpayer is treated as an isolated expected utility maximizer. ChEATAX extends the standard analysis of individual compliance behavior to explore how individual decisions are affected by their beliefs about others’ compliance choices in a cross-cultural dimension.
4) In addition, ChEATAX highlights and analyses cross-cultural differences in attitudes towards immigration and gender as crucial dimensions influencing individual tax compliance behavior (Finseraas, 2008).
Regarding the impact of the project, ChEATAX’s findings can be useful for policy-makers. The first results is that subjects – even if coming from different locations – react in a predictable manner to changes in the parameter of taxation (tax rate, redistribution, audit rate). Thus, ChEATAX basically encourages policies which seek to increase detection of tax evasion. In addition, ChEATAX’s results suggest that other factors shape individuals’ tax behavior, including gender, beliefs about others’ behavior, and attitudes towards who should receive tax-funded benefits.
Andrighetto et al (2016). Are some countries more honest than others? Evidence from a tax compliance experiment in Sweden and Italy. Frontiers in Psychology.
Finseraas, H. (2008). Immigration and preferences for redistribution: An empirical analysis of European survey data. Comparative European Politics, 6(4), 407-431.
Zhang et al (2016). ""Willing to Pay?"" Tax Compliance in Britain and Italy: An Experimental Analysis. PloS one, 11(2).
Santoro, A. (2010). L'evasione Fiscale. Bologna: Mulino."