More bang for your buck: tax compliance in the United States and Italy

Abstract

I investigate the relationship between perception of public institutions and tax com- pliance using a large tax compliance laboratory experiment conducted in Italy and the United States. In the rst test, I conduct a simple tax compliance game to uncover that given the exact same decisions, contributions to the public good do not di er between Italy and the United States. Secondly, I ask participants to pay taxes to their national government, pension fund, and re department. In these rounds, behaviors diverge with Italian participants complying signi cantly less than Americans. Theoretically, I provide evidence demonstrating that how individuals perceive their institutions is a crucial component of the tax compliance decision. Methodologically, I provide a unique experiment, which can help us to better explain cross-country variation in tax compliance, by asking subjects to make country-specific tax decisions.