Corruption and tax revenues: evidence from Italian regions

This paper investigates the impact of corruption on tax revenues. Drawing on Italian regional data that distinguish between corruption crimes in which public officers play an active role (active corruption) and crimes in which there is collusion between the public officers and their private counterparts (passive corruption), the paper shows that only active corruption harms tax revenues. We argue that active corruption alters the incentives for honest taxpayers, leading to inefficiencies and a greater distance between citizens and public authorities, because it generates uncooperative public administration and reduces the perceived fairness of public systems. The estimates confirm the hypothesis and the results call for greater attention to be paid to the quality of public administration.