Private Giving Fills Tax Shortfalls After Public Shaming

Why This Question Matters

Do citizens step in to fund public services when others evade taxes? Simone Paci tackles this question by testing whether private donations and volunteering compensate for a weakening fiscal contract — a key issue for understanding how societies maintain local services when formal taxation falters.

What Simone Paci Tests

The study asks whether exposure to visible tax noncompliance prompts individuals to increase charitable contributions and local volunteering, and whether those responses are driven by altruism, reputation concerns, or declining trust in the tax system.

Slovakia Natural Experiment

Paci leverages a natural experiment from Slovakia that exploited the timing of a naming-and-shaming tax-disclosure policy. Communities exposed to the public disclosure of noncompliant taxpayers donated 16% more than communities not yet exposed, consistent with private contributions stepping in where public finance weakens.

Survey and Conjoint Evidence

A complementary survey experiment replicates the effect: treated respondents increased charitable giving by about 9% and reported eroded confidence in the tax system. Additional experimental components show:

• Donations rise most among respondents who say their town depends on public services, pointing to an altruistic motive.
• In a conjoint experiment, respondents exposed to tax-shaming information were more likely to prefer donations routed through public institutions, suggesting reputation or public-minded signaling also matters.

Cross‑Country Corroboration

Paci supplements country-level findings with cross-country survey evidence demonstrating a robust positive correlation between perceived local tax cheating and rates of local volunteering, bolstering the external validity of the Slovak and experimental results.

What This Implies

The evidence indicates that civil society can partially compensate for a faltering fiscal contract: visible tax noncompliance spurs private giving and volunteering, driven by concern for local public-service provision and by reputational dynamics. These mechanisms reshape how scholars and policymakers think about the interplay between tax compliance, trust, and voluntary public-good provision.