The Boundaries of Solidarity. How the Territorial Level of Redistribution Influences Tax Compliance

In European national societies, the boundaries of social rights, political participation and ethnic belonging used to be relatively congruent. This has changed dramatically in the past decades. Immigration, globalization and European integration challenge our understanding of where taxes are paid, who decides what happens to them, and who ultimately will benefit from them. This change induces additional insecurity that is likely to impact individuals’ preferences for redistribution. In view of increased international interdependence, the call for supranational redistribution has become more vocal. On the other hand, existing research suggests that citizen satisfaction is higher the more decision making power is at the municipal level. Moreover, direct democracy, which is most easily achieved in small-scale polities, significantly increases people’s tax morale.

Therefore, the proposed paper seeks to understand how citizens’ willingness to pay taxes is influenced by their information on at which level (local/regional, national, European) taxes will be redistributed. To answer this question, I carry out a number of tax compliance experiments. Subjects are given the opportunity to earn money and to evade taxes by reporting a lower income than they had actually earned. They are divided into treatment groups that receive differing information with respect to the territorial level at which the taxes will be redistributed. Experiments are highly beneficial to this task as they allow analysing actual behaviour rather than inferring from reported behaviour or opinions on tax morale, which might be heavily influenced by social desirability.

By tackling this question, this paper has important implications for current policy debates and places itself in the wider scholarly discussion on the tension between community and scale in multi-level governance.