Asked who is least trustworthy among a group of EU nations, Italians named Italians during face-to-face interviews for Pew’s Global Attitudes survey in 2013.
Where are we going? To whether Italians cheat more on their taxes than Swedes.
A Tax Surprise
In a recent experiment, approximately 300 Italians and 300 Swedes were given the opportunity to deal with tax scenarios. The place was a lab where participants were asked to pay taxes in hypothetical but realistic situations. Knowing an audit was a possibility, some had high tax rates and others low, some enjoyed more redistribution and others less, and those with higher income might or might not have had a higher marginal rate.
The results were surprising. Although Italians have a less honest reputation than Swedish people, in the lab both groups had the same average rate of tax evasion. But looking more closely, the study uncovered entirely different kinds of cheating. Behaving like “fudgers,” Italians tended to be slightly dishonest somewhat frequently. Meanwhile displaying an “all or nothing” character, the Swedes were more likely than the Italians to pay entirely or not at all.
You can see below that Italian and Swedish compliance rates are rather similar in the experiment:
However, displaying unequivocal honesty or dishonesty, a larger proportion of the Swedish group paid 100% of their taxes or 0% while the Italians’ behavior fell somewhere in between (below):
Our Bottom Line: Tax Evasion
Even when developed countries share similar kinds of tax structures and democratic institutions, their experience with tax evasion and avoidance could vary considerably. As a result, optimizing tax collections requires a closer look at culture and social norms when trying to remedy fiscal dysfunction.
And that returns us where we began. Perhaps Italians need to stop believing they are untrustworthy.