Tax morale, fiscal capacity, and war
Alessandro Belmonte,
Désirée Teobaldelli and
Davide Ticchi (d.ticchi@univpm.it)
Annals of Public and Cooperative Economics, 2023, vol. 94, issue 2, 445-474
Abstract:
This paper studies the effects of mobilization for war on the development of fiscal capacity and the values of tax compliance (tax morale). We propose a dynamic setting where governments may invest resources to improve the efficiency of the fiscal apparatus and the citizens' tax morality in order to raise the necessary revenues for the defense against a threat (external or internal), and parents optimally choose to transmit their preferences of tax compliance to children. Despite fiscal capacity and tax morale are initially substitutes, we show how a dynamic complementarity may arise in equilibrium from a more efficient transmission of the values of tax compliance in countries with high fiscal capacity, and this may explain why they tend to move together over time. Under reasonable conditions, we obtain that the effect of a higher threat of war on the steady‐state level of the culture of tax compliance is negative when fiscal capacity is relatively low, and positive when the latter is large. We show cross‐country evidence based on war frequency, fiscal capacity, and tax morale that is consistent with the results of our theory.
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://doi.org/10.1111/apce.12388
Related works:
Working Paper: Tax Morale, Fiscal Capacity, and Wars (2018) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bla:annpce:v:94:y:2023:i:2:p:445-474
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1370-4788
Access Statistics for this article
Annals of Public and Cooperative Economics is currently edited by Marco Marini
More articles in Annals of Public and Cooperative Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery (contentdelivery@wiley.com).