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Local autonomy, tax morale, and the shadow economy

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Abstract

Policymakers often propose strict enforcement strategies to fight the shadow economy and to increase tax morale. However, there is an alternative bottom-up approach that decentralises political power to those who are close to the problems. This paper analyses the relationship with local autonomy. We use data on tax morale at the individual level and macro data on the size of the shadow economy to analyse the relevance of local autonomy and compliance in Switzerland. The findings suggest that there is a positive (negative) relationship between local autonomy and tax morale (size of the shadow economy).

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Authors and Affiliations

  1. The School of Economics and Finance, Queensland University of Technology, GPO Box 2434, Brisbane, QLD, 4001, Australia

    Benno Torgler

  2. Department of Economics, Johannes Kepler University of Linz, 4040, Linz-Auhof, Austria

    Friedrich Schneider

  3. Economiesuisse, University of St. Gallen, Hegibachstrasse 47, 8032, Zurich, Switzerland

    Christoph A. Schaltegger

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  1. Benno Torgler
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  2. Friedrich Schneider
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  3. Christoph A. Schaltegger
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Correspondence to Friedrich Schneider.

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All are research fellows of CREMA—Center for Research in Economics, Management and the Arts, Switzerland. Torgler and Schneider are also associated with CESifo.

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Torgler, B., Schneider, F. & Schaltegger, C.A. Local autonomy, tax morale, and the shadow economy. Public Choice 144, 293–321 (2010). https://doi.org/10.1007/s11127-009-9520-1

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