Willing to pay? : tax compliance in Britain and Italy : an experimental analysis

Abstract

As shown by the recent crisis, tax evasion poses a significant problem for countries such as Greece, Spain and Italy. While these societies certainly possess weaker fiscal institutions as compared to other EU members, might broader cultural differences between northern and southern Europe also help to explain citizens’ (un)willingness to pay their taxes? To address this question, we conduct laboratory experiments in the UK and Italy, two countries which straddle this North-South divide. Our design allows us to isolate the influence of cultural factors on individuals’ willingness to pay taxes while holding institutions constant. We report a surprising result: when faced with identical tax institutions and audit probabilities, Italian participants are significantly more likely to comply than Britons. Overall, our findings directly contradict “culturalist” arguments that would attribute cross-country differences in tax compliance to the lack of morality amongst southern European taxpayers.