The 7th Shadow Conference: The Shadow Economy, Tax Behaviour and Institutions

Klarita Gërxhani is Professor of (micro)economic sociology at the European University Institute, Florence, Italy. Her research is interdisciplinary, combining laboratory and field experiments with field surveys and economic-sociological theory. She is the author of many articles published in internationally peer-reviewed journals in economics and sociology, including Journal of Political Economy, Annual Review of Sociology, Social Networks, European Sociological Review, Experimental Economics, Social Science Research, among many others.

Keynote title: Formal and informal institutions: Understanding the shadow economy in transition countries

Abstract: This talk will provide an overview of my research on tax evasion and undeclared work in transition countries. My main contribution is both theoretical and empirical. From an institutional perspective, I argue that for a better comprehension of noncompliant activities, one should consider both formal and informal institutions simultaneously. Doing so is particularly relevant for transition countries, because institutional change has been a defining feature of their economies. Empirically, I combine observational with experimental data and examine the role of individuals' attributes and attitudes about institutions on their engagement in the shadow economy, as well as the outcome of such engagement. My main conclusion is that people's experience with the governing formal and informal institutions have important repercussions for the economy as a whole - a large shadow economy; for the state - large budget deficits and hence lower investments in public goods; for personal well-being; and finally, for the overall society via institutional trust and social capital.

Joel Slemrod is an American economist and academic, currently serving as a Professor of Economics at the University of Michigan and the Paul W. McCracken Collegiate Professor of Business Economics and Public Policy at the Stephen M. Ross School of Business at the University of Michigan. He does research on taxation, with a focus on taxation of personal income. He is co-author of Taxing Ourselves: A Citizen's Guide to the Great Debate over Tax Reform and the editor of Does Atlas Shrug? The Economic Consequences of Taxing the Rich. Slemrod also serves as Director of the Office of Tax Policy Research, a research centre at the University of Michigan on matters of tax policy.

Keynote title: New research about the effectiveness of tax enforcement initiatives: What works, and what doesn’t work.

Abstract: In this address, I will review recent research about the effectiveness of tax enforcement initiatives, stressing the results of randomized controlled trials of variations in taxpayer notification, information reporting, withholding, collateral sanctions, and public disclosure.

Alexis Spire is the Research Director of CNRS. He conducts research on the transformations of the State and on the sociology of inequalities. For several years, his research has also focused on the historical sociology of taxation. After being interested in the transformations of the social relation to the tax, he directed his research towards the contemporary forms of inequality before the tax. A long-term ethnographic survey allowed him to go behind the scenes of the tax administration and to show the differences in treatment from one tax to another and from one taxpayer to another.

Keynote title: How the privileged class tames tax? Exit, voice and bargaining.

Abstract: Taxpayers at the top of the social order believe that regulations are necessary to the proper functioning of society but that they themselves must be able to disregard these because of the specific constraints that weigh on them. The first part of this presentation will focus on how taxpayers from the dominant class use their access to international mobility to reduce the amount they pay to the state. This type of strategy can either be fraudulent by transferring secretly a part of their wealth and earnings abroad, or legal by relocating to a country with more advantageous taxation. The second part highlights another strategy which consists of politicising the tax issue by openly and collectively demanding lower taxation for the wealthy. The challenge then is to convince journalists, opinion leaders, and governments that preserving the interests of the well-off is a matter of public interest. A third strategy minimises taxes by remaining within the framework of the law while using the possibilities of exemption and negotiation it affords.

In order to apprehend the strategies of dominant class taxpayers, it is important to consider the legal framework, as well as the negotiations between taxpayers and street-level bureaucrats in tax offices. Focusing on these ordinary relationships to taxes means abandoning the positive understanding of the law which formally distinguishes optimisation (making the most of tax rules within the framework of the law) and fraud, which covers all illegal activities. All these practices are part of the same process of taming tax constraints. Dominant class taxpayers generally seek to distinguish themselves from the loud anti-tax demonstrations of the common man. At the top of the social ladder, the aim is to reduce one’s fiscal contributions while also displaying one’s tax compliance. This relational approach differs from academic works which focus on tax compliance without considering the taxpayer’s social position.