Fiscal Autonomy and Tax Compliance:insights from Italy’s Municipal Waste Tax

Larysa Minzyuk, Rosaria Vega Pansini and Francesco Vidoli ()
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Larysa Minzyuk: Ufficio Parlamentare di Bilancio
Rosaria Vega Pansini: Ufficio Parlamentare di Bilancio
Francesco Vidoli: Department of Economics, Society & Politics, Università di Urbino Carlo Bo

No 2502, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: This paper investigates the determinants of local tax compliance focusing on Italy’s municipal waste tax (TARI). Despite the 2012 fiscal federalism reform that expanded local autonomy, fiscal evasion rates remain high and not homogeneous across territories. Using a balanced panel of 6,846 municipalities over 2017-2023, we apply a dynamic panel approach to account for endogeneity, persistence, and unobserved heterogeneity in tax collection behaviour. The results show that civic engagement significantly enhances compliance, while generalized trust exerts a negative effect, suggesting that exclusive social ties may undermine fiscal responsibility. These findings highlight the behavioural foundations of local tax performance and indicate that fiscal autonomy alone is insufficient to foster compliance without supportive social capital. To assess whether these relationships are spatially homogeneous, we extend the analysis by implementing a local System GMM estimation, which reveals substantial regional heterogeneity and underscores the spatially contingent nature of fiscal behaviour. These results call for spatially tailored fiscal policies that integrate institutional capacity with the social foundations of compliance.

Keywords: Tax compliance; Fiscal federalism; Local taxation; Social capital; Municipal finance; System GMM (search for similar items in EconPapers)
JEL-codes: C23 H26 H71 H77 Z13 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2025, Revised 2025
New Economics Papers: this item is included in nep-iue, nep-pbe and nep-soc
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_25_02.pdf First version, 2025 (application/pdf)

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