The Effect of Tax Enforcement on Tax Morale

40 Pages Posted: 7 Mar 2014

See all articles by Antonio Filippin

Antonio Filippin

Università degli Studi di Milano; IZA Institute of Labor Economics

Carlo V. Fiorio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Eliana Viviano

Bank of Italy

Date Written: October 25, 2013

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.

Keywords: tax morale, tax enforcement, tax gap

JEL Classification: H26, H29, D70

Suggested Citation

Filippin, Antonio and Fiorio, Carlo V. and Viviano, Eliana, The Effect of Tax Enforcement on Tax Morale (October 25, 2013). Bank of Italy Temi di Discussione (Working Paper) No. 937, Available at SSRN: https://ssrn.com/abstract=2405391 or http://dx.doi.org/10.2139/ssrn.2405391

Antonio Filippin

Università degli Studi di Milano ( email )

Milan, 20122
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Carlo V. Fiorio

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Eliana Viviano (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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