‘Honest’ Swedes as likely to fudge taxes as crafty Italians

Italians are often considered to be more dishonest than their northern European counterparts, due mostly to the country's high profile problems with corruption and tax evasion.

'Honest' Swedes as likely to fudge taxes as crafty Italians
A new study suggests Italians and Swedes are just as likely to cheat on their taxes. Photo: Ken Teegardin/Flickr

But new research published by the journal, Frontiers in Psychology, this month suggests Italians may have a raw deal when it comes to their 'cheating' reputation.

In order to arrive at this conclusion, researchers conducted an experiment during which they asked 311 Italians and 327 Swedes from across their respective countries to play a game.

During the game, each participant earned credits based on their performance but then had to pay a tax on their earnings, knowing there was a five percent chance that they could be caught and heavily penalized if they lied about how much credit they had accrued.

The results were surprising.

Researchers found that there was only a small difference in the level of evasion practiced by both nationalities – with both groups hiding on average more than 30 percent of their earnings.

The typical Swede reported 66.6 percent of their credits, the typical Italian, 63.1 percent.

“An analysis of the average compliance rate does not support prevailing national stereotypes that Swedes are more honest than Italians,” the study reported.

So how is it then that tax dodgers cost Italy €122 billion in 2015, but cost the Swedish coffers just €5 billion in the same year?

“Under controlled conditions there's no significant difference between how honest Italians and Swedes are but, unfortunately, in real life the 'conditions' of the two countries are very different,” Giulia Andrighetto, one of the study's authors, told The Local.

Andrighetto explained that in countries where institutions were generally efficient, like Sweden, instances of tax avoidance were much lower.

This is because people fear being caught out and prosecuted but is also due to the fact that they are more willing to pay, as they can see where their tax expenditure in going.

Essentially, Italians are more likely to evade taxes because of their inefficient public structures and not the other way around.

“The findings are important because they show that we can't just ignore tax evasion by saying 'oh that's just how Italians are',” added Andrighetto. “We need to change our public structures to combat the problem.”

The study also revealed some curious differences in how Italians and Swedes cheat.

Swedes were much more likely to either cheat seriously or not at all, whereas Italians showed a much greater propensity for 'fudging' their claims: cheating more habitually but with greater restraint.

Some 26 percent of Swedes were totally honest throughout the experiment, compared with just 15 percent of Italians. However, nine percent of all Swedes were completely dishonest, compared to just five percent of Italians.

Indeed, in Italy, cheating just a little is seen as culturally acceptable. If an Italian describes you as being 'furbo' -meaning cunning – it is almost always to be taken as a compliment.

“It's possible that Italians see cheating a little as an important way to get ahead, given the lack of faith they have in their public structures,” Andrighetto explained.

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Italy to cut income tax for lower earners

Italy will drop its income tax bands from five to four and reduce tax rates for those on lower incomes under an agreement reached by key figures in the Italian government on Thursday.

Italy's finance minister Daniele Franco has reached an agreement with the government’s majority parties to cut income tax for lower earners.
Italy's finance minister Daniele Franco has reached an agreement with the government’s majority parties to cut income tax for lower earners. Andreas SOLARO / AFP

Going forward, personal earnings of between 28,000 and 50,000 euros will be taxed at 35 percent in Italy, down from the current rate of 38 percent.

Taxes on earnings between 15,000 and 28,0000 euros will be reduced from 27 percent to 25 percent.

The 41 percent tax band for earnings between 55,000 and 75,000 euros will be abolished altogether, with all income over 50,000 euros now set to be taxed at the top rate of 43 percent.

READ ALSO: EXPLAINED: How Italy’s proposed new budget could affect you

Yearly incomes below 15,000 euros will continue to be taxed at 23 percent.

The agreement was reached as the result of negotiations between Italy’s Economy Minister Daniele Franco and representatives of the majority parties in the Italian government over how to distribute the 8 billion euro tax cut provided for in Italy’s 2022 Budget Law.

Under the terms of the agreement, approximately 7 billion euros will go towards overhauling Italy’s personal income tax, or ‘IRPEF’, though these reforms.

READ ALSO: The rules and deadlines for filing Italian taxes in 2021

The remaining one billion will be used to eliminate the regional production ‘IRAP’ tax on sole proprietors and the self-employed.

The so-called ‘Bonus Renzi’, introduced by former Italian prime minister Matteo Renzi in 2014, which initially awarded an 80 euro and later a 100 euro tax bonus to lower earners, will be scrapped altogether.

Tax experts estimate that the reforms are likely to translate to average yearly savings of 100 euros for those on a 20,000 euro annual salary; 300 euros for those earning 30,000 euros per year, and around 600 for those receiving 40,000 euros per year, according to the Italian news daily Corriere della Sera.