Fiscal psychology past and present: Contemporary experiments validate historical hypotheses

Journal of Economic Psychology 35 (2013) 81–94

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Fiscal psychology past and present: Contemporary experiments validate historical hypotheses Luigi Ferrari ⇑, Salvatore Randisi Department of Psychology, University of Milano-Bicocca, Milan, Italy

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Article history: Received 6 September 2012 Received in revised form 20 January 2013 Accepted 21 January 2013 Available online 30 January 2013 JEL classification: B30 C90 D03 H20 PsycINFO classification: 2260 2360 2960 Keywords: Amilcare Puviani Taxation Fiscal psychology Fiscal numbness Perceived fiscal sacrifice

a b s t r a c t Fiscal psychology is not a modern discipline. The history of economic thought leaves no doubt as to the fact that many of the notions of fiscal psychology as we know it today were present in the past. There are even cases, though these are not frequent, of economists and social scientists of the past who understood certain psychological aspects of the taxpayer which went out of fashion and of which contemporary fiscal psychology is not aware. Such is the fate of Amilcare Puviani (1854–1907), a marginalist in the tradition of Vilfredo Pareto and an advocate of the study of Italian Public Finance which was in vogue at the end of the 1800s and the early years of the 1900s. We have conducted a number of experiments to verify certain of Puviani’s theories regarding the behaviour of the taxpayer, all of which tested positively. Of particular interest is his concept that a minor tax levied contemporaneously with a heavier tax is better tolerated than if it is levied alone. Another related concept, not yet widely known to contemporary fiscal psychology, is of undoubted interest: a tax when levied under favourable circumstances is more tolerable. Finally, we verified Puviani’s hypothesis that a tax is easier to accept if split into a number of instalments of nominal amounts, and also (but this is applicable only to a certain category of tax payer) that an indirect tax is better supported if it is not specified in the price of the product or service being taxed. Ó 2013 Elsevier B.V. All rights reserved.

1. When did fiscal psychology come into being? There are a number of questions that have not received sufficient attention in economic psychology in general and in fiscal psychology in particular. When did fiscal psychology come into being? Has the psychology of the taxpayer been studied prior to modern fiscal psychology? If so, how, by whom? When? What were the findings? These questions may appear to be banal. At a cursory glance, fiscal psychology would appear to be a modern development, and consequently without any history. This idea is easily confuted; all that is required is a detailed study of the scholars of the past who studied the relationships between the State and the economy. It is a fact that the study of the psychological variables of fiscal behaviour preceded what we commonly define today as fiscal psychology by many years. True, these reflections so distant in time from the present, but no less important for that, were not qualified as psychology and were not labelled as such. Indeed, many of the authors of these reflections were economists.

⇑ Corresponding author. Tel.: +39 02 64483709; fax: +39 02 64483706. E-mail address: [email protected] (L. Ferrari). 0167-4870/$ - see front matter Ó 2013 Elsevier B.V. All rights reserved. http://dx.doi.org/10.1016/j.joep.2013.01.007

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Take Smith, for example, and his ‘‘An Inquiry into the Nature and Causes of the Wealth of Nations’’ (1776); the Scottish economist dedicated Chapter III of the fifth book of this great work to taxation. He made specific and extensive reference to the taxation of luxury items and laid great importance on the lack of fiscal awareness in the various social classes. A few years later, Ricardo wrote along much the same lines in ‘‘On the Principles of Political Economy and taxation’’ (1817), remarking on the confusion which reigned in the mind of the taxpayer and the fact that governments certainly did not disdain exploiting these cognitive limitations regarding fiscal issues. In the middle of the 1800s another important economist, Mill (1848, ‘‘Principles of Political Economy’’, p. 174), was to take up Ricardo’s concepts and develop them further. He concentrated his studies on the reaction of the taxpayer to the various types of taxes and observed that, under the same tax burden outlay and consumption may decrease or even increase with the application of a new tax. The first case usually occurs when a new tax is levied on wealth or consumption (for example on real estate or on alcohol), while an increase in spending may occur when an inheritance tax is applied. He took a very modern approach to the psychological problem of the greater acceptance of indirect taxes (where the tax burden is ‘concealed’ in the price of the taxed item); he explained that his compatriots could support heavy taxation as long as they were not obliged ‘to look the taxman in the eye’, as this leads to a clear and typical perception of the direct tax. Cournot (1863, 1877) also took up the subject of how the taxpayer supports the tax burden and his acceptance of governments imposing taxes. This economist, rightly considered a classic pillar of economic thought, was convinced that real fiscal growth has a secular trend. In his view the taxpayer is accustomed to a certain tax burden, and to a degree this numbs him to the distress, but, Cournot warns, this state of mind needs time to consolidate. Cournot lived and wrote at the time of the marginalist revolution of economic thought. Marginalism had a tormented relationship with psychology; in the early days, the economists of the neoclassic/marginalist paradigm considered psychology a resource to explain economic behaviour. However in the years 1934–1939 Hicks and Allen (1934a, 1934b) and Hicks (1939) reversed this, with a rigid rejection of psychology. Those were the years in which the premises were created for the paradigm of the rational taxpayer, a paradigm that blocked most of the economic thought on the social– psychological component of fiscal behaviour. It was only in the years after World War II, after the studies conducted by Katona and the developments in the field of psychological science that the psychology of the taxpayer came back into vogue. This was the period during which fiscal psychology as we know it today came into being. Summing up, there can be no question that the history of economic thought has made significant contributions to the study of fiscal psychology. However, there is still an important question to be answered: are there still concepts of interest and novelty to be found in these contributions, or even concepts of importance for modern fiscal psychology? This is not an easy question to answer. An accurate and in-depth study of historical thought is necessary in order to fully comprehend the real reach of these reflections. At a first glance, it would seem that the major part of the results of these contributions has been integrated into modern fiscal psychology; for example, the difference in perception and toleration of direct and indirect taxes which intrigued economists in the past, has been carefully analysed by modern fiscal psychology. It can in fact be said that significant progress in methodology has been made in most of the fiscal subjects dealt with, particularly from an empirical point of view. It follows that very often the interest for psychological studies of taxation before fiscal psychology is purely historical in nature, with regard both to the study of thought and to the indirect study of past forms of taxation and the reconstruction of the history of the reactions of the taxpayer. There is however at least one very important exception.

2. The historical tradition of fiscal psychology research of Italian Public Finance The important Italian tradition of research in the field of Public Finance is known to very few outside Italy (and if we are honest, to very few in Italy itself!) and even fewer are aware of its relevance for fiscal psychology. This is to be attributed mainly to the fact that these researchers wrote in Italian, but there is another important barrier. It must be kept in mind that in Italy Public Finance was studied mainly by marginalists of the Paretian school and this line of thought developed and declined (rather rapidly) in the first half of the 1900s, so the study of Italian Public Finance had to face the consequences of the withdrawal of marginalism from psychology just at the time when it could have been at its apex. A few years after Hicks and Allen introduced their theoretical reversal of marginalism in the 1930s, Italian academic economists gradually started to lose interest in the psychological aspects of their subject and so the tradition lost its drive. Having said that, there were several acknowledgements from influential scholars, some at international level, before this interest faded away completely. Particularly worthy of note is James Buchanan, the American economist who won the 1986 Nobel Prize for economics. Just after World War II, he won a Fulbright scholarship to study Italian Public Finance in Italy. It was no coincidence that Buchanan was extremely interested in the psychological aspects of taxation; indeed, he spoke of a ‘fusion’ of psychology and economics applied to fiscality: Quite apart from the ‘‘true’’ distribution of tax shares and benefit shares, the ‘‘perceived’’ distribution matters. Fiscal perception becomes an important and relevant area for positive analysis. By necessity, ‘‘fiscal psychology’’ merges with fiscal economics. The research potential for positive analysis seems almost unlimited, and relatively little has been done (Buchanan, 1975, p. 390). Now we will examine the mainstays of these psychological studies, and see which of the teachings have survived.

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3. The works of Puviani A thorough analysis of these studies is impossible without focussing on their founder: Puviani (1896, 1903; see also Cullis & Lewis, 1985; Lewis, 1982). He was born in 1854 in San Felice sul Panaro, a small town close to Modena in the north of Italy, and taught in the University of Perugia for 17 years, where he died in 1907. Puviani had a neoclassic economic background, but he was also extremely interested in the other humanities. His theory pivoted on the neoclassic homo oeconomicus, but he did not consider the taxpayer as an isolated social atom – quite the contrary, he was convinced that most of the psychological problems related to taxation and the entire financial governance of the state had their origins in intermediate bodies of society. In holding this position Puviani was very close to Vilfredo Pareto. It is well known that Pareto was a historical pillar of economic marginalism who however in the last years of his life acknowledged the crucial defect of marginalism, i.e., that it considered people in their economic identity as isolated individuals with no relationships with social groups and those in power. Pareto developed a complex sociological theory based on this critique, of which Puviani was very well aware. However Puviani was not just a theoretician of public economy and financial science; he was also a sophisticated and disenchanted political scientist and a scholar of government élites (he was almost certainly influenced by the sociologist Gaetano Mosca, who was one of the leading Italian scholars of the élite). Much of his psychological sensibility regarding fiscal problems has its origin in his considerations on the behaviour of the governing élite1. In fact the title of his major work of 1903 is most eloquent, etc. The Theory of Financial Illusion (La teoria della illusione finanziaria). In this book he deals with the increasing importance in democracies of the fiscal supportability and illusions of the taxpayers/voters in elections and re-elections of the governing élite. The typical scenario of his theory, which to a certain extent anticipated the structure of the political business cycle2, can be synthetized as follows:

He was also aware of the increasing importance of the state in the economy and was convinced that there was more at stake than just the undeniably important question of conservation of power. According to Puviani, the perception of fiscal policies and their acceptance by the electorate is of particular relevance for society’s social order, or the distribution of power and wealth among groups and social classes. Therefore his intention was to study the laws of formation of beliefs and social sentiment regarding taxes, public spending and the élite who had made the decisions regarding them. The term illusion in 1 Buchanan summarized the Italian tradition of psychological studies of Public Finance as follows: Precursors of supply-side analysis can, of course, be found in the Italian theory of public finance in the nondemocratic or monopolistic state. Models of this political structure were developed in some detail, models in which some ruling group or class collects taxes from the masses who are ruled and utilizes the proceeds to its own maximum advantage. But attention was also paid to the feedback or reaction effects on the behavior of those who were exploited. At the turn of the century, Puviani developed the interesting and stillrelevant concept of ‘‘fiscal illusion’’, which he applied to both the tax and the spending side of the fiscal account. (Buchanan, 1975, p. 388). 2 At the start of the political business cycle, the governing élite enforces a certain rigor as the elections are still far off; at the end of the cycle, when the elections are close to hand, they let public spending run wild. See Alesina, Roubini, and Cohen (1997).

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the title is the true key to his 1903 work; it expresses his firm belief that the knowledge transmitted regarding taxation is thoroughly irrational. The causes of this irrationality are threefold: cognitive distortions, the intense emotional and affective experiences related to fiscality, and, lastly, the widespread and deadly ignorance of the man in the street on issues regarding taxes and public spending. According to Puviani, most taxpayers have no knowledge of the following aspects of public spending: (a) (b) (c) (d) (e) (f) (g)

its existence, the amounts involved, what it is actually used for, its duration, its real purpose, when it actually takes place, its immediate and midterm effects.

With regard to revenues, taxpayers are in blissful ignorance of their (a) quantity, (b) duration, (c) quality. Again according to Puviani, there is much more to this ignorance when it is considered from a psychological point of view. To grasp its full significance, we have to start from the fundamental proposition proposed by Puviani (1903, p. 22 – our translation from the Italian original): 3.1. All forms of state revenues can be more or less concealed from the taxpayer This means that ignorance is contemporaneously a passive attitude (the taxpayer) and wilful concealment (government and taxman). Let us focus on the deep ignorance of the state fiscal revenues. Given this combination of passivity and the active practice of fiscal concealment, it is possible to pull the wool over the taxpayer’s eyes regarding the amount of money that the State is actually raking in from  income from state-owned real estate, the alienation of state assets and other incomes from public assets;  inflation;  false promises by the tax authorities, such as temporary (or one-off) taxes which are never abolished. According to Puviani there are other illusionary forms of under-estimation of the amount that is being paid in tax that are of even greater psychological relevance; we will examine these shortly. 4. The unhappiness and happiness of the taxpayer and the fragmentation and concealment make taxes more tolerable Puviani held that fiscality can be represented by a circle. Ignorance increases the taxpayer’s level of tolerance of the taxes, so lessening his desire for information. Indirect taxes (such as VAT), where the amount of tax is concealed in the price of the merchandise, are a perfect example of this ignorance–tolerance circularity. However, ignorance alone is not sufficient to explain tolerance of taxes. Assuming the degree of knowledge of the tax as being equal, the level of tolerance can vary according to how it is levied. Puviani suggested a complex taxonomy of the variables that increase the level of tolerance of a known tax; for reasons of space we have drastically reduced these variables, focussing on those parts of Puviani’s work that constituted a novelty for the fiscal psychology of the times. It is however to be hoped that an in-depth analysis and a formal English translation of La teoria della illusione finanziaria will be made available. In Puviani’s opinion the degree of distress caused by the tax burden changes depending on whether the tax is associated with a pleasant or unpleasant circumstance. The tax is better tolerated if levied contemporaneously with events that have been greatly desired, or desired for a long time, which provide value to the taxpayer and enhance his wellbeing, such as purchases of luxury items, donations, weddings, graduations, and business. Almost everyone demonstrates almost total indifference to the tax (which in Italy is usually quite considerable) levied in transactions regarding the purchase of real estate or automobiles, especially if these have been a long-term aspiration. The tax is perfectly open and above board3, but the satisfaction (which in some cases can even be euphoria) generated by the acquisition of the taxed item occupies all the mental space available, and so annuls the distress that would be caused by payment of the same tax under other circumstances. So satisfaction and euphoria usually eradicate the payment from the cognitive field. In

3

In this case, and in the following research hypotheses, the rank-sum test (p < 0.05) was used to evaluate the differences between the PFS items.

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this case we have a form of secondary concealment, which is not strictly cognitive and/or generated by the nature of the tax, but by the affective/emotive circumstances in which it is paid. Similarly, the weight of the tax burden can be diminished by unpleasant or distressful events such as an inheritance following a death4, bankruptcy, alienation of property or assets to pay debts, and penal sentences. According to Puviani, such events result in what he defined as «saturazione dolorosa» (1903, p. 156) literally «saturation of pain», that can best be described as a form of numbness provoked by acute distress, which renders the individual docile and removes any natural resistance to paying taxes that under different circumstances would be considered excessive. This numbness is based on a mechanism which is symmetric to that triggered by pleasant events. Puviani, however, takes this concept further, and adds a very important nuance (Puviani 1903, p. 167, our translation from the Italian original). We must [. . .] examine another particular case of great psychic law, whereby certain lesser problems become easier to bear when in juxtaposition with other burdens of greater import. The greater burdens, with which we are dealing here, [. . .] instead of being provoked by the loss of a relative or the enforced sale of an asset [. . .] are also provoked by the tax. Paying tax is a particular and distressing event. All other conditions being equal, a modest tax can be tolerated better if associated with a tax of greater proportions: in other words, the heavier tax acts as an anaesthetic for the minor tax, with the greater distress cancelling the minor one provoking a sense of numbness. This may sound paradoxical, but in fact is not; substantial taxes are frequently accompanied by surtaxes, increases, and other forms of modest fiscal contributions5. All these additional taxes pass unobserved when the taxpayer pays the main tax, which is the basic source of distress. Puviani applied two important general principles of psychology to the principal stating that pulverisation of taxes is effective in attenuating the perception of the fiscal burden: (1) below a certain threshold a stimulus cannot cause distress; (2) contiguous and equal stimuli do not produce the same sensation. Payments of taxes, however substantial they may be, will not exceed the ‘tolerance’ threshold if they are subdivided into a number of instalments of modest amounts. This form of payment avoids the tax becoming the focus of our conscious feelings of wellbeing or distress. Moreover, in application of the second principle, when faced with a number of payments of the same sum, even if the sum is substantial, the taxpayer’s feeling of distress decreases with each payment. In other words the previous payment causes more distress than the subsequent one. The steady rhythm of the payments may even give rise to a feeling of numbness that pushes the tax into the background, once again provoking a sort of suppression due to affective– emotive mechanisms. Puviani’s laws on fiscal thresholds were inspired by those of Ernest Heinrich Weber (1834, 1846); in particular, both hold that the increases in a stimulus required to produce a slightly perceptible variation in feeling are constant. Puviani also adopted Fechner’s generalization (1860): the magnitude of a sensation is a logarithmic function of the stimulus. The laws of Weber and Fechner were very popular in the 1800s; they gave rise to the hope that human behaviour could be explained with a few laws and for this reason they became the psychological keystone of the neoclassic–marginalist revolution6. 5. An empirical study of Puviani’s theory We have conducted experimental verifications on many of the illusions Puviani studied and in all cases we found empirical confirmation. 5.1. The hypotheses subjected to verification 5.1.1. H1 A two-version scenario7, which will be fully explained in the article, was created to assess the numbness hypothesis, evaluating the perception of the fiscal sacrifice following payment of: (A) an additional levy on personal income tax decided by the municipality of residence (Italian fiscal norms provide for the levying of this additional tax, the amount of which is decided annually by the individual municipalities and varies accordingly); 4 In Puviani’s view an inheritance can be either a source of joy or of distress, depending on the circumstances. Normally, the loss of a relative will produce joy when the inheritance is substantial, the person was only a distant relation and the affective involvement is non-existent or minimal. In certain fiscal and juridical systems this justifies heavier dues on inheritances from distant relatives. 5 In 1994, there were approximately 100 different types of tax levied in Italy. 85% of the total fiscal revenues of the state came from only seven taxes (96% from the first 15; Italian Ministry of Finance, 1994). The situation had not changed significantly by 2010 notwithstanding the numerous campaigns supporting simplification of the fiscal system. At present the main Italian income tax (IRPEF) has two additional taxes. 6 The first marginalists founded their theories on the principle that the utility/(disutility) of a gain/(loss)of unchanging magnitude, diminishes with each repetition of the sensation of satisfaction/(distress). 7 In Italy purchases of new cars require the payment of a tax (IPT) to the local provincial authorities. The more powerful the engine, the higher the tax, which is in any case quite substantial: the tax due on a car of 150 HP, with a value of 25,000 euro, is 493 euro. The purchaser is perfectly aware of the tax as it is indicated in the cost estimate and in the final sale contract.

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(B) a generic, free-standing, one-off tax of the same amount (i.e., not related to any other tax). The expected outcome of this research hypothesis (H1) is that the perceived fiscal sacrifice relative to the payment of the additional tax will be less than that of the generic tax (B) as it is associated with the payment of a significantly higher tax. The research hypothesis was: H1. The numbness effect will result in an underestimation of the fiscal sacrifice perceived for the payment of a new tax when associated with the payment of a higher tax. A key concept for the evaluation of the hypothesis is the level of distress generated by the payment of a specific tax, or the perception of the fiscal sacrifice. Therefore, our first step was to create a scale with which to measure the perceived fiscal sacrifice (PFS), after which we conducted a pilot test and then proceeded to evaluate H1. A description of the sample selection process is provided below (5.3 point), together with the procedure adopted to construct the PFS scale, the research paradigm and the results obtained. 5.1.2. H2 Moreover, we assessed whether it is true that fragmentation of a tax and its payment by instalments results in a reduction of the perceived fiscal burden by applying the scenario technique to the Italian tax for solid urban waste (in Italy commonly known as TARSU). With research study (H2) we verified Puviani’s hypothesis that paying taxes by instalments gradually reduces the perception of fiscal sacrifice as the payments lessen the amount of tax remaining to be paid. Two sub-hypotheses have been created to compare the degree of perceived fiscal sacrifice in two conditions. The first sub-hypothesis was as follows: 1. (A) payment of tax by single payment and (B) payment of tax by instalments; While the second was formulated as below: 2. (A) the payment of the first instalment and (B) the payment of the final instalment, in which the amount payable is the same as for the first instalment. The general research hypothesis was: H2. The cutting up (or fragmentation) of the tax into smaller, more manageable amounts, removes the sting from the distressing stimuli, or renders them increasingly less distressful, and therefore diminishes the perception of fiscal sacrifice. Hence the two sub-hypotheses are: H2.1. Payment of a tax by instalments reduces the overall perceived fiscal sacrifice. H2.2. As the perceived fiscal sacrifice decreases with the payment of the individual instalments (the instalments being of equal amounts), the sacrifice involved in the first instalment is perceived as greater and gradually diminishes, becoming significantly less when the last instalment is paid. 5.1.3. H3 A third scenario involving the payment of the Value Added Tax (VAT) on an asset was used to assess the Puviani’s law of variation of the fiscal sacrifice by concealment, or in other words, the condition in which the amount of tax is not openly declared. In this case, we compared the perceived fiscal sacrifice in the case where: (A) the price of a product is stated as being inclusive of VAT, but does not specify the precise amount of the tax; (B) the amount of VAT applied to the same product as above is clearly specified. According to this research hypothesis (H3), the fact that the consumer is not aware of the amount of VAT (case A) should diminish the perception of fiscal sacrifice. In this case the research hypothesis was: H3. Concealment of the indirect tax results in a reduction of the perceived fiscal sacrifice. 5.1.4. H4 Finally, we created another scenario to assess the hypothesis of the lesser perception of fiscal sacrifice in cases in which the payment was made under pleasant circumstances. In this case, we considered the payment of taxes due on a donation, comparing the perception of the sacrifice of:

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(A) those receiving the donation; (B) the benefactor. In this scenario, (H4) we assume that the pleasure in receiving a gift will reduce the perception of fiscal sacrifice. The general research hypothesis is: H4. When the tax occurs in the ambit of a state of wellbeing, the fiscal sacrifice is underestimated. 5.2. Sample The taxpayers of the Lombardy region were taken as the sample universe. The Lombardy region ranks first among the Italian regions for fiscal revenues and population (9,917,714 residents of whom, according to the Italian Statistical Institute (ISTAT), 8,249,509 are of legal age). The sample was selected with the assistance of regularly registered chartered accountants (located mostly in the provinces), whose e-mail addresses were posted on the web sites of their respective associations. These chartered accountants assisted us in individuating a group of clients willing to participate in the study. The PFS scale was created with the support of 117 taxpayers, and a second sample of 94 taxpayers assisted us in fine-tuning the scale and reducing its dimensions. A third (and final) sample of 559 taxpayers were involved in evaluating hypotheses H1, H2, H3 and H4. 5.3. The scale for measuring Perceived Fiscal Sacrifice (PFS) The source and inspiration of our scale is a research conducted in Italy by Berti and Kirchler (2001) on 260 Italian taxpayers, including free-lance professionals, businessmen, students, employees of the private and public sectors. The researchers asked the participants to list all the words that came to their mind on hearing the word ‘tax’. With this procedure they collected 147 different associations, from which we selected 55 of the most representative, referring to (a) opinions on taxes (such as considering them obsolete and adequate) and (b) the feelings aroused by the word ‘tax’ (such as anger and hope). For the first version, composed of the 55 selected items, we adopted a self-anchoring response scale, indicating disagreement/agreement respectively for minimum and maximum values in 10 steps, in order to create a familiar evaluation scale. The participant was asked to express his degree of agreement or disagreement with each item, such as: ‘‘I think that the tax is an abuse’’, or ‘‘The tax makes me angry’’ (for example for VAT). We also verified whether it would be possible to distinguish between different taxes by asking the participants to fill in the scale twice, once for personal income tax (IRPEF) and once for VAT. These taxes are both sufficiently well known for the participants to be able to express an informed opinion, and sufficiently different one from the other – the former being a direct tax and the latter an indirect tax – so that it could be expected that the perceived burden of the payment of the latter would be underestimated due to its lesser visibility compared to the direct tax (as an example, see Musgrave, 1954). After using this with 117 participants, this first version was seen to be suitable for discriminating between the two taxes on the basis of the PFS. The PFS indices corresponding to the average of the individual points (and calculated after inverting the values of the items with a positive connotation) were equal to 3.75 (DS = 1.26) and 3.31 (DS = 1.34), for income tax and VAT respectively. This difference was statistically significant (t (116) = 4.78; p < 0.01) and can be explained by the lesser visibility of the indirect tax (VAT), which favours a greater fiscal ignorance and underestimation of the related sacrifice. The internal consistency of the scale was high for both income tax and VAT (Cronbach’s Alpha was equal to 0.96 and 0.97 respectively). In order to reduce the dimension of the scale we conducted an explorative factorial analysis (Analysis of the principal components with an oblique Promax rotation). We obtained a solution in which the first three factors could explain 60% of the variance of the variables, of which 43% was explained by the first factor alone. The most important aspect that emerged was that of 40 variables saturated by the first three factors, 17 of the variables saturated by the first factor referred to feelings. We were therefore able to eliminate all the items relative to opinion, after which we conducted a new factorial analysis (analysis of the principal components with the extraction of a single factor) on the remaining 33 items, which were all related to feelings. This analysis individuated the seven least discriminative items, i.e., those with a low degree of variance explained by the extracted factor (communality less than 0.25). The remaining 26 items were adopted for the PFS scale administered during the following pilot test. 5.3.1. Pilot phase of the PFS and further developments In the pilot phase (n = 94) we asked the participants to compile the new scale (26 items) in association with the taxes described in the scenarios illustrated in par. 5.1 above. The material presented will be described later, for the present we will focus on certain aspects regarding the development of the scale. We noticed, for example, that the attention required for compilation was negatively impacted by an excessive number of items and when certain of these items were superfluous. We would in fact have preferred to reduce the scale further, but the sample was too small for a factorial analysis. Therefore we used the information obtained from an analysis of the distribution of the frequency of the responses to the 26 items.

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In this phase, we eliminated the 14 items that had obtained the highest percentage of responses (from 66% to 81%) on the score of 1 (on a scale from 1 to 10), i.e., the items that were least discriminative, which according to the majority of the participants did not describe feelings evoked by payments of taxes. As the concentrations of responses at the extremities or in the central area of the scale indicated that 10 points were too many, we opted for a 7 point scale for the final test which was comprised of 12 items as shown in Fig. 1 below. The synthetic PFS index corresponds to the arithmetical average of the responses to the 12 items. Each item can be studied individually for an in-depth evaluation, which however requires an examination of the meaning in the Italian language of the terms that indicate the feelings listed in the scale, keeping in mind that there are a number of partial semantic overlaps, which may change depending on the language used. For example, distaste can be defined as disgust and aversion. A waste of public money or excessively high fiscal pressure can evoke feelings of distaste. Disgust, on the other hand, still represents aversion, but also moral repulsion and intolerance. This latter term indicates the incapacity to tolerate or endure. Aversion can also be defined as irritation, for ire, disdain, wrath or anger. This latter term can therefore express irritation but it often simply means also dismay, or a sense of delusion and distaste. Delusion is the state of mind provoked when hopes are betrayed and expectations fade, as for example when taxpayers expect that governments and fiscal authorities will take measures against tax evaders and then fail to do so. Delusion can generate lack of esteem and contempt. Frustration is a state of depression that may follow the failure to achieve a wish or satisfy a need, and may be associated with the dissatisfaction of the taxpayers for the services received, as well as a certain aversion or opposition, and a sense of protest. The feeling of impotence ensues when the condition of weakness combines with incapacity to act. On the one hand, this may arise from the passivity of the taxpayer faced with the coercive aspect of taxation and on the other from the awareness that he does not possess the means to evade or elude the tax authorities even if he wishes to. The sense of encumbrance or impediment, the sense of oppression, occurs in those who are subjected to harassment, an aspect that has recurred in psychological reflections in the field of finance since Adam Smith’s analysis of 1776; in recent literature on the perception of justice this is one of the most studied topics. After the optimum form for the PFS was individuated, we test the hypotheses H1, H2, H3 and H4 with a series of scenarios, each of which regarded a specific tax. 5.4. H1 – Numbness and the supplemental income tax 5.4.1. Scenario The numbness scenario was constructed in two versions for this hypothesis (H1): (A) ‘‘Imagine that this year your income tax will amount to approximately 10.000 euro and that you will also be required to pay a supplemental local income tax of 108 euro.’’ (B) ‘‘Imagine that this year, on the basis of your income you will have to pay a ‘one-off’ tax of 108 euro.’’ Each of the 559 participants involved in assessing H1 was presented with one of the two versions. After they had read the phrase, they were asked to evaluate the fiscal sacrifice for the payment of the tax, i.e., either the additional local income tax (A) or the one-off tax (B), where the same amount was involved in both cases. Applying Puviani’s hypothesis of numbness, the sacrifice involved in case A, should be perceived as being less than in case B due to the juxtaposition of the supplemental local income tax with the greater amount of the basic income tax, which should make the taxpayer more tolerant. 5.4.2. Sample and results The participants were equally distributed with regards gender, age (the average age was approximately 42), level of education (mainly medium to high), and between employees and free-lance professionals (Table 1). PFS scale to measure Perceived Fiscal Sacrifice. Tax* evokes feelings of…

absolutely no

1

2

3

1 2 3 anger 1 2 3 distaste 1 2 3 frustration 4 1 2 3 intolerance oppression 5 1 2 3 6 1 2 3 delusion dismay 7 1 2 3 8 1 2 3 protest 9 1 2 3 contempt 10 1 2 3 disgust impotence 11 1 2 3 12 1 2 3 irritation *The supplemental local income tax or the one-off tax enclosed in the scenario. 1 2 3

4 4 4 4

5 5 5 5

6 6 6 6

7 7 7 7

4 4 4

5 5 5

6 6 6

7 7 7

4 4 4

5 5 5

6 6 6

7 7 7

4 4 4

5 5 5

6 6 6

7 7 7

Fig. 1. PFS scale to measure perceived fiscal sacrifice.

absolutely yes

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L. Ferrari, S. Randisi / Journal of Economic Psychology 35 (2013) 81–94 Table 1 Sample: characteristics. Variables

Frequency

Gender Male Female Missing values

255 298 6

45.6 53.3 1.1

559

100.0

10 64 260 28 180 3 14

1.8 11.4 46.5 5.0 32.2 0.5 2.5

559

100.0

63 172 221 34 17 12 3 22 15

11.3 30.8 39.5 6.1 3.0 2,1 0.5 3.9 2.7

559

100.0

Education Elementary school Middle School High school diploma Three-year degree Five-year degree Doctorate Missing values

Employment Entrepreneur Free-lance professional Employee – private sector Employee – public sector Student Pensioner Unemployed Other Missing values

%

Table 2 H1: PFS index. Version

n

M (PFS index)

DS

A – Supplemental local income tax B – One-off tax

280 279

2.80 3.23

1.77 1.82

The difference between the two PFS indices that emerged from the two experimental conditions (Table 2) was significant (t (557) = 2.86; p < 0.01), therefore the research hypothesis is confirmed. The PFS was extremely reliable (Cronbach’s Alpha was between 0.92 and 0.97 in all these scenarios). The analysis of the individual items (Table 3) showed high scores for distaste, dismay, irritation and the feeling of impotence. The difference between the two PFS indices that emerged from the two experimental conditions was significant for these items and also for anger, oppression, frustration and protest.8 5.5. H2 – Payment of taxes by instalments and the Solid Urban Refuse Tax (TARSU) 5.5.1. Scenario As mentioned above, two sub-hypotheses have been identified for research study H2, payment of tax by instalment. The first sub-hypothesis has been formulated in two versions: (1A) ‘‘Imagine that given the municipality in which you reside and the dimension of your apartment you have to pay 108 euro of Solid Urban Refuse Tax (TARSU), to be paid in a single payment into a bank account or at the post office, without any extra costs being incurred by the form of payment chosen.’’ (1B) ‘‘Imagine that given the municipality in which you reside and the dimension of your apartment you have to pay 9 euro per month, for an entire year, of Solid Urban Refuse Tax (TARSU), to be paid into a bank account or at the post office, without any extra costs being incurred by the form of payment chosen.’’ The participants were shown only one of the two versions, and were asked to evaluate the fiscal sacrifice they perceived would result from paying the TARSU in the form they were shown (either in a single payment (1A), or in instalments (1B).

8 The ‘scenario technique’ has been proved to be effective in assessing research hypotheses in various studies on decision making and fiscal psychology, present in the literature (e.g., Kirchler, Maciejovsky, & Schneider, 2003; Reckers, Sanders, & Roark, 1994; Roberts, Hite, & Bradley, 1994).

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Table 3 H1: Average score of the individual items of the PFS. Items of the PFS

Version

Anger

A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax A – Supplemental B – One-off tax

Distaste Frustration Intolerance Oppression Delusion Dismay Protest Contempt Disgust Impotence Irritation

local income tax local income tax local income tax local income tax local income tax local income tax local income tax local income tax local income tax local income tax local income tax local income tax

n

M

DS

280 279 280 279 280 279 280 279 280 279 280 266 280 266 279 278 280 279 279 279 280 276 280 279

2.65 3.38 3.34 4.04 2.36 2.80 2.79 3.01 2.44 2.81 2.77 3.05 3.37 4.05 2.99 3.36 2.21 2.49 2.22 2.49 3.13 3.54 3.31 3.91

2.09 2.29 2.18 2.15 1.95 2.11 2.09 2.14 2.02 2.12 2.08 2.21 2.27 2.26 2.22 2.22 1.92 2.09 1.89 2.12 2.32 2.33 2.32 2.34

According to research study H2.1 the perceived fiscal sacrifice would be less when paying by the instalments as opposed to a single payment. The latter case (1B) was also used to test sub-hypothesis H2.2, again followed by the request to assess the perceived fiscal sacrifice: (2A) when paying the first instalment; (2B) when paying the final instalment. According to the research study hypothesis, the sacrifice perceived when paying the final instalment should be less than when paying the first instalment even though the instalments are of the same amount. 5.5.2. Results The differences between the two PFS indices regarding the single payment (1A) versus payment by instalments (1B), and payment of the first instalment (2A) versus payment of the final instalment (2B), were significant (respectively t (259.50) = 2.38; p < 0.05; t (276) = 2.31; p < 0.05); the research hypothesis is therefore confirmed (Table 4). With regard to the first sub-hypothesis (H2.1), the analysis carried out on the individual items (Table 5) returned maximum scores for distaste, dismay, irritation, feelings of protest and impotence. The difference in the PFS indices of the two versions was significant for distaste and feelings of protest, followed by delusion, contempt and disgust. With regard to the second sub-hypothesis (H2.2), the analysis carried out on the individual items (Table 6) returned maximum scores for the feelings indicated in the first sub-hypothesis, but with an increase in the feelings of distaste and the addition of intolerance, which reflects the feelings of impatience that payment by instalments can in fact generate. The sense of sacrifice greatly diminished with the payment of the final instalment (2B), due mainly to the decreased sense of distaste, dismay and feelings of protest. 5.6. H3 – ‘Concealed’ tax and VAT 5.6.1. Scenario For this research hypothesis (H3), the two versions were formulated as follows: Table 4 H2: PFS index. Version

n

M (PFS index)

DS

1A – TARSU: single payment 1B – TARSU: by instalments 2A – TARSU: first instalment 2B – TARSU: final instalment

130 151 150 128

2.19 1.86 2.24 1.90

1.23 1.04 1.30 1.05

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L. Ferrari, S. Randisi / Journal of Economic Psychology 35 (2013) 81–94 Table 5 H2.1: Average score of the individual items of the PFS. Items of the PFS

Version

n

M

DS

Anger

1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments 1A – TARSU: single payment 1B – TARSU: by instalments

130 151 130 151 130 151 130 151 129 151 130 151 130 151 129 151 130 151 129 151 130 150 130 150

1.83 1.71 2.99 2.52 1.81 1.54 2.07 1.96 1.81 1.58 2.00 1.57 2.53 2.28 2.39 1.79 1.73 1.40 1.90 1.43 2.58 2.33 2.60 2.17

1.46 1.40 2.02 1.81 1.35 1.09 1.43 1.60 1.29 1.16 1.43 1.14 1.85 1.70 1.77 1.35 1.25 0.92 1.47 0.95 2.00 1.95 1.96 1.70

Distaste Frustration Intolerance Oppression Delusion Dismay Protest Contempt Disgust Impotence Irritation

Table 6 H2.2: Average score of the individual items of the PFS. Items of the PFS

Version

n

M

DS

Anger

2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment 2A – TARSU: first instalment 2B – TARSU: final instalment

150 128 150 128 149 128 150 128 150 128 150 128 149 128 149 128 150 128 150 115 150 115 150 128

1.81 1.72 3.24 2.67 1.87 1.60 2.43 2.08 1.89 1.59 1.90 1.65 2.80 2.08 2.28 1.82 1.69 1.39 1.72 1.51 2.47 2.25 2.74 2.38

1.49 1.33 2.04 1.83 1.48 1.12 1.78 1.60 1.48 1.07 1.45 1.19 2.09 1.57 1.78 1.33 1.37 1.01 1.41 1.24 1.98 1.87 2.14 1.83

Distaste Frustration Intolerance Oppression Delusion Dismay Protest Contempt Disgust Impotence Irritation

(A) ‘‘Imagine buying a new television which costs 648 euro (including VAT).’’ (B) ‘‘Imagine buying a new television which costs 648 euro (including VAT). Keep in mind that you are paying 540 euro for the television and 108 euro of VAT (value added tax).’’ As before, the participants were shown only one of the two versions, and were asked to evaluate the fiscal sacrifice they perceived would result from paying the VAT. According to the research study hypothesis, the sacrifice perceived when paying the VAT without being aware of the exact amount involved (A) should be less than when the amount is known (B).

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5.6.2. Results The difference between the two PFS indices calculated in the two experimental conditions did not reach significance (Table 7). The analysis carried out on the relationship between the PFS index and the socio-anagraphic characteristics revealed an inverse correlation with age (r = 0.194; p < 0.01) in case B (when the amount of the tax is declared). In other words, when the amount of VAT to be paid on a product is clearly stated, the perception of fiscal sacrifice is greater amongst younger people. If the very young are separated from the less young (putting the age of 40, which is close to the mean age of the sample, as the age limit) and the PFS indices for the two experimental conditions (Table 8) are then recalculated, the difference reaches significance and is therefore a confirmation of the research hypothesis only for the very young (t (236.5) = 1.94; p = 0.054). The analysis carried out on the individual items (Table 9) returned maximum scores for distaste, dismay, irritation, and the feeling of impotence. The difference in the PFS indices of the two versions was only significant for the group of younger people, amongst whom the awareness of the mount of VAT to be paid significantly increased the feelings of anger. 5.7. H4 – Taxation in a state of wellbeing – gifts 5.7.1. Scenario Two versions of the hypothesis that the level of fiscal sacrifice would diminish if payment of fiscal dues were to occur in connection with a state of wellbeing (H4) were formulated: (A) ‘‘Luke and Mary decide to purchase a bigger house. Having heard of their plans, an uncle decides to make them a present of a large, furnished apartment, valued at approximately 400,000 euro. The gift is greatly appreciated, and after having paid the taxes amounting to 30,000 euro, the couple decide to celebrate by going on a cruise.’’ (B) ‘‘Luke and Mary decide to purchase a bigger house. Having heard of their plans, an uncle decides to make them a present of a large, furnished apartment, valued at approximately 400,000 euro. The taxes due on this gift amount to 30,000 euro, but their uncle decides to pay them himself, to avoid that the young couple should have to pay for the gift.’’ As in the previous hypotheses, each participant involved in assessing H4 was shown only one of the two versions. After they had finished reading the text, they were asked to evaluate the fiscal sacrifice involved, putting themselves in the position of the person(s) paying the tax: the young couple in version A, and the uncle in version B. 5.7.2. Results The difference between the PFS indices calculated for the two versions of this scenario (Table 10), reached significance (t (548.29) = 2.55; p < 0.05). The analysis carried out on the individual items (Table 11) returned maximum scores for distaste, dismay, irritation, impotence and anger. There was a significant difference for these items, as well as for frustration, between the two versions considered. 5.8. Discussion of results Contemporary fiscal psychology must take into consideration the wealth of observations and reflections to be found in the history of economic and political thought and, in general terms, widen its horizons to extend beyond the purely psychological (Cullis & Lewis, 1985; Kirchler, 2007 and Lewis, 1982 who cite Schmölders, 1959). Complex theoretical processes and simple empirical observations of the past, as in the case of Puviani, can both provide stimuli for systematic research that will swell and enrich our knowledge. According to Puviani, several general psychological principles can be applied to issues regarding taxation; he asserted that the perception of fiscal sacrifice when paying a tax could be diminished by inducing a state of numbness, by splitting the tax into instalments, by playing on the ignorance of the taxpayer or his underestimation of the tax and in certain circumstances, by exploiting a state of well-being of the taxpayer. In this study we have assessed these principles – principles that Puviani described, but did not verify empirically – through experimentation. In general, the results of the experiments conducted on these hypotheses confirm the validity of all his intuitions on the theory of fiscal illusion and consequently the importance of the issues raised by this scholar. H1. When living in a state of wellbeing, people tend to be aware of events that cause even the slightest distress; on the other hand, when living in a state of general discomfort people hardly notice stimuli that cause a minimum of additional distress. We compared the sacrifice perceived for the payment of a supplemental local tax associated with the principal tax (i.e., income tax) with that generated by a single payment of a tax of the same amount, taken in isolation from the pay-

Table 7 H3: PFS index. Version

n

M (PFS index)

DS

A – Amount of VAT not specified B – Amount of Vat specified

280 279

2.06 2.17

1.21 1.26

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L. Ferrari, S. Randisi / Journal of Economic Psychology 35 (2013) 81–94 Table 8 H3: PFS index by age (age limit: 40). Age

Version

n

M (PFS index)

DS

Younger

A – Amount of VAT not specified B – Amount of Vat specified

117 123

2.12 2.42

1.13 1.28

Less young

A – Amount of VAT not specified B – Amount of Vat specified

163 153

2.02 1.93

1.27 1.18

Table 9 H3: Average score of the individual items of the PFS by age (age limit: 40). Items of the PFS

Anger Distaste Frustration Intolerance Oppression Delusion Dismay Protest Contempt Disgust Impotence Irritation

Version

Younger

A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified A – Amount of VAT not specified B – Amount of Vat specified

Less young

n

M

DS

n

M

DS

117 123 117 123 117 123 117 123 117 123 117 123 117 123 117 123 117 123 117 123 117 123 117 123

2.11 2.47 2.91 3.26 1.75 1.97 2.01 2.19 1.75 1.91 1.86 2.22 2.63 3.08 2.15 2.45 1.71 1.85 1.65 1.84 2.45 2.88 2.44 2.93

1.72 1.73 1.90 1.93 1.22 1.32 1.48 1.51 1.22 1.35 1.22 1.51 1.85 1.88 1.53 1.80 1.22 1.32 1.12 1.39 1.83 2.19 1.82 1.99

163 153 163 153 163 153 163 153 163 153 163 153 163 153 163 153 163 153 163 153 163 153 163 153

1.80 1.75 2.63 2.34 1.67 1.79 2.17 1.99 1.67 1.78 1.72 1.65 2.46 2.31 2.07 1.98 1.55 1.45 1.61 1.48 2.48 2.44 2.37 2.24

1.54 1.40 1.94 1.67 1.28 1.41 1.78 1.48 1.29 1.42 1.35 1.22 1.93 1.75 1.65 1.53 1.12 1.01 1.28 1.07 2.06 1.97 2.03 1.82

Table 10 H4: PFS index. Version

n

M (PFS index)

DS

A – Tax paid by the recipients B – Tax paid by the donor

280 279

3.40 3.79

1.99 2.00

ment of other taxes. The results show that there is a significant difference between these two levels of perceived sacrifice, thus confirming Puviani’s hypothesis of numbness. H2. In this case we were able to confirm that the perception of the fiscal sacrifice decreases if there is the possibility of paying the tax by instalments; moreover, the perception of sacrifice was much less when the final instalment was being paid, as opposed to the payment of the first. According to Puviani this is due to a transformation of the perception of the tax from an extraordinary event into a routine occurrence. He explained the dynamics which determine the reduction of the perception of sacrifice by pointing out that the perceived burden of the single payment is greater than the overall effect of the individual instalments. Moreover, the decrease in the ‘‘affliction of the tax’’ also depends on the degree of ‘resistance’ that the payment of the first instalments may generate, which over time however mutates into a feeling of ‘impotency’. The analysis of the individual items of the PFS scale shows that this feeling of impotence is particularly high compared to the other items and its score is always high even under conditions in which the PFS index itself decreases. In other words, the initial perception of the fiscal sacrifice is determined by a feeling of protest which over time is revealed as ineffective, thus giving way to a feeling of impotence, thus confirming Puviani’s hypothesis. H3. The results of the third scenario revealed a rather more complex situation, due to the decisive role played by the age of the participants. The version in which the price of a television was given, stating that VAT was included without however specifying the actual amount of the tax, generated practically the same level of perceived fiscal sacrifice as the condition in which the amount of VAT was openly indicated. However when the sample was divided into two groups on the basis of age, dividing the very young from the less young (cut off age = 40), the difference in the level of perceived fiscal sacrifice emerged

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Table 11 H4: Average score of the individual items of the PFS. Items of the PFS

Version

n

M

DS

Anger

A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor A – Tax paid by the recipients B – Tax paid by the donor

280 278 280 279 279 278 280 279 280 278 280 279 280 279 279 279 280 279 280 279 280 278 280 279

3.38 3.95 4.11 4.63 3.05 3.46 3.32 3.57 3.01 3.28 3.36 3.64 3.99 4.55 3.47 3.76 2.74 3.05 2.83 3.02 3.61 4.04 3.96 4.48

2.40 2.51 2.28 2.19 2.32 2.35 2.30 2.37 2.29 2.40 2.29 2.41 2.37 2.26 2.33 2.43 2.25 2.46 2.29 2.46 2.43 2.45 2.40 2.42

Distaste Frustration Intolerance Oppression Delusion Dismay Protest Contempt Disgust Impotence Irritation

only in the younger group, amongst whom the statement of the amount of VAT payable gave rise to an increase in the level of perceived sacrifice, and in particular generated additional feelings of anger. This result, which partially confirms the research hypothesis, still requires further investigation. H4. Finally, the hypothesis that the perception of fiscal sacrifice would diminish when associated with a state of wellbeing was confirmed by the experiment which simulated the gift of a taxable asset. A closing comment regarding our PFS scale; it proved to be reliable and easy to use, as it is both short and easily comprehensible in the complex subject of taxation. It provides a tool not only for measuring a synthetic index, but also other useful details in qualitative research such as, for example, the most common feelings evoked by taxation, i.e., distaste and dismay, which emerged as being particularly representative in the perception of fiscal sacrifice. References Alesina, A., Roubini, N., & Cohen, G. D. (1997). Political cycles and the macroeconomy. Cambridge, MA: The MIT Press. Berti, C., & Kirchler, E. (2001). Contributi e contribuenti: Una ricerca sulle rappresentazioni del sistema fiscale. Giornale italiano di psicologia, vol. 3. Buchanan, J. M. (1975). Public finance and public choice. National Tax Journal, XXVIII(4), 383–394. Cournot, A. A. (1863). Principes de la théorie des richesses (2012). Paris: Hachette Bnf. Cournot, A. A. (1877). Revue sommaire des doctrines économiques (1968). New York: Augustus M. Kelley. Cullis, J., & Lewis, A. (1985). Some hypotheses and evidence on tax knowledge and preferences. Journal of Economic Psychology, 6(3), 271–287. Fechner, G. T. (1860). Elemente der Psychophysik. Leipzig. Hicks, J. (1939). Value and capital (1991). Oxford: Clarendon. Hicks, J., & Allen, R. G. D. (1934a). A reconsideration of the theory of value, Part I. Economica. New Series, 1(1), 52–76. Hicks, J., & Allen, R. G. D. (1934b). A reconsideration of the theory of value, Part II A mathematical theory of individual demand functions. Economica, New Series, 1(2), 196–219. Kirchler, E. (2007). The economic psychology of tax behaviour. Cambridge, UK: Cambridge University Press. Kirchler, E., Maciejovsky, B., & Schneider, F. (2003). Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences matter? Journal of Economic Psychology, 24(4), 535–553. Lewis, A. (1982). Introduction. Journal of Economic Psychology, 2(3), 155–163. Mill, J. S. (1848). Principles of political economy (1988). London: Penguin Books. IV–V. Musgrave, H. (1954). The theory of public finance. New York: McGraw-Hill. Puviani, A. (1896). Il problema edonistico nella scienza delle finanze. La Riforma Sociale, 5 (III, IV). Puviani, A. (1903). Teoria della illusione finanziaria (1973). Milano: ISEDI. Reckers, P. M. J., Sanders, D. L., & Roark, S. J. (1994). The influence of ethical attitudes on taxpayer compliance. National Tax Journal, 47(4), 825–836. Ricardo, D. (1817). Principles of political economy and taxation (1951). Cambridge, UK: Cambridge University Press. Roberts, M. L., Hite, P. A., & Bradley, C. F. (1994). Understanding attitudes toward progressive taxation. Public Opinion Quarterly, 58(2), 165–190. Schmölders, G. (1959). Fiscal psychology: A new branch of public finance. National Tax Journal, 12, 340–345. Smith, A., & An inquiry into the nature and causes of the wealth of nations (1961) (1776). London: Methuen & Co. Ltd.. Weber, E. H. (1834). De Tactu. Leipzig. Weber, E. H. (1846). Der Tastsinn und das Gemeingefühl. Leipzig.