Could the Perception of Benefit Fraud Shape Attitudes Towards Taxation?: An Empirical Analysis in Europe

Abstract

2020AbstractAfter the negative effect of the recent financial crisis on public finances in many countries, it is of a great interest to study attitudes towards taxation to identify effective policies to enhance public support for taxation and welfare programs. In this paper, we analyze empirically people’s attitudes towards taxation in European countries. In particular, we test whether the perception about benefit fraud may produce different effects on preferences over the size of the welfare state along the income distribution. Moreover, we test if contextual variables are relatively more relevant than individual characteristics in determining attitudes towards taxation. Using different data sources for many EU countries in 2008, we contrast those hypothesestaking advantage of multilevel techniques. Our results suggest that policies targeting the deterrence of benefitfraud such as higher penalties and more frequent benefit investigations, increase the high earners’ willingnessto pay taxes and then the size of the welfare state. We also find that contextual characteristics explain a largervariance of attitudes toward taxation than individual characteristics, suggesting that the same policy for allUE countries might be not a good strategy.

Keywords: Attitudes toward taxation, welfare state, benefit fraud, multilevel techniques

JEL Classification: H3, H26