Thoughts on Italian tax mores

Here's my thoughts on the Italian tax mores.
One of the distinct point of Italian tax system is that the government at the beginning doesn't trust the corporation, and the fact seems to confirm their assumption: companies do cheat when filing tax returns. BUT correlation doesn't mean cause and effect. It remains a question whether the government reacts to the innately dishonest corporations or the government policy incentivizes the corporations to cheat. But one thing for sure is that this tradition sucks because honesty is punished. If a company cannot tell the truth on its tax file, I cannot be convinced that the company will be honest and serve the customers well.

Besides, this tax mores creates a new job: commercialista. In my opinion, this job functions as tax lawyer in American tax system, acting as middlemen who has to comparative advantage to lower the transactions costs in the tax negotiation. But just as you said in Econ108, these people could have done something more productive. Caveat: I am not saying that all middlemen are unnecessary. What I wanna say is that middlemen can be useful in irreplaceable economics activities like financial transaction or most commonly, information gathering and shopping. Tax negotiation could have been eliminated in the first place, so these new jobs are unwanted ones.

But suppose we cannot change the fact that tax negotiation thrives in Italy, another problem arises, the principal-agent problem. If the commercialista collude with the government agents, the companies bear even more costs. Even if there is no moral hazard problem, the difference of the negotiation capacity of commercialista will result in  distinguishable prices of these agents and various outcome of the negotiation. The whole process will be extremely costly both in time and money.

Tax deprives of the profit of the companies and thus raise the cost of doing business. Now the Italian tax mores even exacerbates the cost and makes it harder to do business in Italy. Since Italy is not the only choice of international trade, foreign companies may start business in other countries and local Italian companies may also have a bad time. In my opinion, the unique tax system is more monstrous than tariff, because at least tariff benefits domestic companies a bit, while the tax system...it tortures every company.

Maybe the worst things resulted from this mores is the booming of bureaucrats. Since the tax revenue agents can take lump-sum bribe in the process of negotiation, young people may be encouraged to be part of the parasite of the society.

Non-economists can certainly attribute this mores to culture difference. But it's safe to say that some cultures are good and some cultures are bad. You certainly do wanna eat part of the brain of your dead relatives simply because it's the inherited culture. One good thing about globalization is that people face more choices, some may be total novelty. When people choose to savor certain of them, it means nothing but that people value them more. Let people make their own choice. There are over 7 billion people in the world, I will not believe that every people has same utility on every single thing. When some one refuse to buy your stuff, it means that you need to change, but to look for "parents" and "teachers" to protect you and force others to care about you is simply childish and naive. But I think many people neglect, whenever they think about globalization, they think that distinct cultures are disappering. I think this is in fact a LACK of CONFIDENCE of their own culture. Another side of the point is that if your stuff is really attractive, it will only spread global-wide and be more attractive.

Oops... I think it's a digression, back to the story. There are three ways I can think of to change to bad culture.

First: Give me a recession. The government will retrospect, the people will retrospect and good outcome may be expected. But a caveat is that things can be overdone. Scapegoats may appear. For example, China faced humiliation during late 19 and early 20 century, and the literati began to retrospect the contry and culture. Then a culture campagin named "New Culture Movement" arises. The good side is that the literati created new way of writing, which we Chinese still use now, but the bad side was that old tradition was nearly eradicated. Even some really good stuff was regarded rubbish at that time. In my opinion, one of the reasons why contemporary Chinese lack knowledge of ancient Chinese history and prose results from the movement.

Second: International trade saves Italy. The Italian businessmen, in the process of trading with foreigners, will come to realize that other ways of tax system is relatively less costly (tax is costly anyway) and may bring back the new way of filing tax returns.

Third: One or certain specific companies can publize their tax files and hire prestigious independent accounting companies to examine and supervise. A good example can be good and this kind of propaganda may have a good outcome.

If I take another look at the story, I can see that this article also tells me that When in Rome, do as the Romans do. But as I said, the moral dilemma is that whether you obey the rule or tell the truth. Actually, there is an implicit PRICE here, if you value ethics more than money, you do the honesty file, if you value money more, you do the opposite. So when I consider things in this way, there seems no quagmire here: it's just another kind of cost and benefit analysis.

But some bad cultures and rules can be harmful. See how many foreign companies fucked up in China.