SEMINAR: Culture, Compliance, and Confidentiality: A Study of Taxpayer Behavior in the United States and Italy

2 PM - room 3E, Department of Economics and Management

Speaker: Michele Bernasconi - University Ca' Foscari, Venice

Abstract

This paper analyzes the impact of confidentiality of taxpayer information on the level of compliance in two countries with very different levels of citizen trust in government – the United States and Italy. In both countries, the payment of the individual income tax relies heavily on voluntary compliance, in which individuals are promised that information will be kept confidential, at least until evasion is proven. Does this promise of confidentiality affect compliance? There is very little empirical evidence of the impact of the confidentiality contract on compliance in any one country and none across countries. Using identical laboratory experiments conducted in the United States and Italy, we analyze the impact on tax compliance of “Full Disclosure” (e.g., release of photos of tax evaders to all subjects, along with information on the extent of their non-compliance) and of “Full Confidentiality” (e.g., no public dissemination of photos or non-compliance). We find that compliance is greater both in the U.S. and in Italy when there is public disclosure of information about individuals found to be tax evaders.
JEL Classifications: H2, H3.
Keywords: Tax compliance, experimental economics, confidentiality, social norm.