The Propagation of Unethical Behaviours: Cheating Responses to Tax Evasion

We explore cheating in a die roll task in response to information about tax evasion in a large-scale experiment on a representative sample of the Italian population. We thus generalise laboratory findings on conditional behaviours (cooperation, cheating) to uncover their real-world bearing in the context of tax compliance. Cheating is conditioned on information about tax evasion, as is the perceived tax compliance norm. We uncover asymmetries along the income gradient: Conditional cheating responses are driven by information about tax evasion on behalf of top income earners, while perceived tax compliance norms are driven by information about tax evasion among low income earners. Instrumental variable investigations of posterior beliefs about tax evasion strengthen these results, and reveal moreover that information about top income tax evasion erodes social trust, reinforces beliefs that wealth accumulation only occurs at others’ expense, and increases beliefs that a fundamental role of the State is that of ensuring an equitable distribution of income.