This paper studies the effects of tackling tax evasion on tax revenue, public goods provision and tax progressivity. It focuses on the “Ghost Buildings” program: an anti-tax evasion policy carried out in Italy that detected more than 2 million buildings not included in the land registry by overlapping satellite data with tax records. The empirical strategy exploits cross-municipality variation in the share of detected unregistered buildings and the staggered introduction of the program to implement a difference-in-differences analysis. The results show a sharp and persistent increase in tax revenue, equal to nearly three-fourth of the projected mechanical increase. This discrepancy is mostly due to imperfect compliance in ensuring enforcement by local administrators in financially unconstrained municipalities. The central government offset any revenue increase with lower transfers, thus changing how municipalities are financed. Relying more on own revenue and on a broader and more enforced tax base makes local politicians more likely to i) increase school spending; ii) raise the progressivity of local taxes on income and property. As a result of these policies, within-municipality inequality is gradually shrinking.
Presented by:
Enrico Rubolino, PhD(c) ISER, University of Essex
Date & time:
19 Feb 2020 12:30 pm - 19 Feb 2020 13:30 pm
Venue:
ISER Large Seminar Room 2N2.4.16
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