The role of the carrot and stick in tax compliance in a decentralised context

José María Durán-Cabré () and Alejandro Esteller-Moré ()
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José María Durán-Cabré: Universitat de Barcelona & IEB
Alejandro Esteller-Moré: Universitat de Barcelona & IEB

No 2025/02, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: We analyse whether decentralisation affects tax morale through both greater trust in institutions (the carrot) and greater perceived tax enforcement (the stick), two drivers of compliance that operate via the promotion of voluntary compliance and deterrence, respectively. We take advantage of the Spanish case characterised by a general regime, which is partially decentralised, and the so-called foral regime, operated in two regions, which is fully decentralised (i.e. high tax regulatory and administrative powers). We draw on data from a unique survey that are representative both of the national level and of the foral regions. Under the foral regime, the average citizen neither presents a higher level of tax morale, nor has the perception of a higher level of enforcement. Thus, any structuring of the tax administration within a federal system cannot be based on what are presumed to be higher levels of compliance resulting from the decentralisation of the administration.

Keywords: Fiscal Federalism; Decentralisation; Tax Morale; Tax Compliance; Survey Data (search for similar items in EconPapers)
JEL-codes: H11 H71 H77 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025
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