Values, Markets and the State
Edited by Geoffrey Brennan and Giuseppe Eusepi
Chapter 10: Searching for Fairness in Taxation: Lessons from the Italian School of Public Finance
Luisa Giuriato1 The safeguard of the essential goes to the benefit also of the general welfare; on the contrary, if what lies at the foundations is betrayed, it takes revenge on everything, welfare included. (Romano Guardini, Ethics) Introduction The taxpayer’s decision to comply with his fiscal duties or to evade taxes2 is taken within a complex set-up, which includes the expected utility maximization calculus, elements of coercion and an individual’s attitude towards the fisc, that is, his intrinsic motivation to pay taxes, the so-called tax morale. Tax morale is often employed as a residuum variable to explain tax compliance when the formal models predict instead that, given the probability of being caught, the size of the fines and the measure of risk aversion, the optimal choice of a rational taxpayer would be to declare no income.3 As Feld and Frey (2002) argue, tax morale is a sort of black box, related to the meta-preferences of the taxpayer. It is shaped by a host of factors (Torgler, 2007), including social and demographic variables, formal and informal institutions, trust, civic virtues, national pride and the perception of fairness or unfairness in the relationship with the government. Investigating tax morale, I focus on the individual’s perception of the tax system and on what the taxpayer considers his or her fair share in the tax burden and in the services offered by the state (Pommerehne, 1985). Along the same lines, Spicer and Lundstedt (1976) and Bordignon (1993, 1994) deem that the rational calculus of...
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