The tax evasion social multiplier: Evidence from Italy

Roberto Galbiati (1) , Giulio Zanella

1 UPN - Université Paris Nanterre

We estimate social externalities of tax evasion in a model where congestion of the auditing resources of local tax authorities generates a social multiplier. Identification is based on a contrast of the variance of tax evasion at different levels of aggregation. We use a unique data set that contains audits of about 80,000 small businesses and professionals in Italy and also provides an exact measure of reference groups in our model. We find a social multiplier of about 3, which means that the equilibrium response to a shock that induces an exogenous variation in mean concealed income is about 3 times the initial average response. This is a short-run effect that persists to the extent that auditing resources are not adjusted to internalize the congestion externality.

Mots clés: Social interactions; Neighborhood effects; Social multiplier; Tax evasion; Tax compliance; Excess variance

Domaines: Sociologie; Economies et finances

Roberto Galbiati, Giulio Zanella. The tax evasion social multiplier: Evidence from Italy. Journal of Public Economics, 2012, ⟨10.1016/j.jpubeco.2012.01.003⟩. ⟨hal-03574131⟩