Università degli studi di Modena e Reggio Emilia

Abstract

Does terrorism increase tax morale? Terror attacks have been shown to impact political attitudes, with a shift towards more conservative views, and to increase people’s sense of insecurity. As a result, one could expect terrorist acts to increase people’s willingness to pay taxes to support the efforts of the state to fend off this threat. Alternatively, successful attacks may decrease citizen’s satisfaction with the state and thus lower tax morale. We propose to investigate this relationship, using France as a case study and using Regression Discontinuity Design (RDD): i.e., relying on a terrorist attack that took place as an extensive household value survey was being collected, thus allowing us to compare average views in the population on tax-paying before and after the attack. Specifically, we focus on a terrorist attack that occurred at the end of March 2018 in the South of France, and we use the 2017 European Value Survey, which was collected from early March to mid-August 2018. Over a quarter of the interviews had taken place before the attack. We find a small positive but insignificant effect of terrorism on tax morale in the short-run and in the full sample, but with a significant increase in the variance of tax morale after the attack. We further explore possible sources of heterogeneous response using a variety of sub-samples and respondents’ characteristics, and show that while tax morale is unchanged on average among respondents with extreme political views (right or left) after the attack, tax morale sharply increases among respondents with more moderate political positioning. In a country with relatively high-tax morale to start with, we conclude that terrorism has a limited impact on citizen’s average willingness to pay taxes but polarises views in the population, strengthening existing divides.