Explaining Italian Tax Compliance

Abstract

Abstract It is well known that tax compliance is low in Italy. Many scholars have examined Italian taxpayer behavior, mainly using experiments and surveys. However, little attention has been given to the historical circumstances that have shaped divergent taxpayer behavior in Italy. This chapter uses historical data from Italian unification through the Second Republic to assess the effects of Italy’s major formal institutions (the Church, state, and political parties) and informal institutions (clientelism) on Italian tax behavior. It argues that nineteenth-century unification and Fascism had significant repercussions for the Italian state and how Italians perceive the state. Because of this, Italians lack trust in their government and their fellow citizens, which inhibits a willingness to pay taxes. The implication then is a low-trust/low-compliance equilibrium that becomes increasingly difficult to reverse.