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on Informal and Underground Economics |
| By: | Alm, James; Bloomquist, Kim M.; McKee, Michael |
| Abstract: | In this paper, we suggest that individuals’ tax compliance behaviours are affected by the behaviour of their “neighbours†, or those about whom they may have information, whom they may know, or with whom they may interact on a regular basis. Individuals are more likely to file and to report their taxes when they believe that other individuals are also filing and reporting their taxes; conversely, when individuals believe that others are cheating on their taxes, they may well become cheaters themselves. We use experimental methods to test the role of such information about peer effects on compliance behaviour. In one treatment setting, we inform individuals about the frequency that their neighbours submit a tax return. In a second treatment setting, we inform them about the number of their neighbours who are audited, together with the penalties that they pay. In both cases, we examine the impact of information on filing behaviour and also on subsequent reporting behaviour. We find that providing information on whether one’s neighbours are filing returns and/or reporting income has a statistically significant and economically large impact on individual filing and reporting decisions. However, this “neighbour†information does not always improve compliance, depending on the exact content of the information. |
| Keywords: | Tax evasion, Tax compliance, Behavioural economics, Experimental economics, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:6775&r=iue |
| By: | Duccio Gamannossi degl’Innocenti (Institute for Fiscal Studies); Matthew D. Rablen (Institute for Fiscal Studies and Sheffield University) |
| Abstract: | We examine the optimal auditing problem of a tax authority when taxpayers can choose both to evade and avoid. For a convex penalty function the incentive-compatibility constraints may bind for the richest taxpayer and at a positive level of both evasion and avoidance. The audit function is non-increasing in reported income, and is higher for progressive tax functions than for regressive tax functions. Higher marginal tax rates increase the incentives for non-compliance, overturning the well-known Yitzhaki paradox. |
| Keywords: | Tax avoidance, Tax evasion, Optimal auditing, Tax administration |
| JEL: | H26 K42 D82 H21 |
| Date: | 2017–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:17/08&r=iue |
| By: | Gemmell, Norman; Ratto, Marisa |
| Abstract: | The ‘standard’ Allingham-Sandmo-Yitzhaki (ASY) model of tax evasion predicts effects on compliance which depend on the perceived probability of detection, tax rate and penalty for evasion. Compliance effects of detection probabilities and tax rates have been extensively tested empirically, but penalty effects are rarely tested explicitly. This paper examines the effects of late payment penalties on tax compliance based on an experiment involving New Zealand goods and service tax (GST) ‘late payers’. Firstly, based on an ASY-type model of tax late payments in which the probability of enforcement, rather than detection, is central, we develop a number of testable hypotheses. Secondly, based on a field experiment involving a specific compliance intervention, we examine how taxpayers respond when given different penalty information. The experiment also allows us to consider differences between taxpayers’ stated intentions to comply and subsequently observed compliance. Results suggest that differences in penalty information given to taxpayers and reductions in penalty rates both affect taxpayers stated intentions to comply (pay overdue tax and penalties) as predicted. However, subsequently observed responses generally appear unresponsive to penalties. Nevertheless, various individual taxpayer characteristics are identifiable that affect both compliance intentions and actual behaviour. |
| Keywords: | Tax evasion, Late payment penalties, Tax experiment, Goods and service tax, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwcpf:6769&r=iue |
| By: | Farquet, Christophe |
| Abstract: | Based on original sources from national and international organizations archives, this paper offers a new perspective on debates on tax evasion in multilateral arenas during the whole 20th Century. A closer look at the cycles of emergence and disappearance of this topic enables to understand why these discussions were raised inside international organizations and why they constantly failed. This paper focuses in particular on the foundation of tax multilateralism at the League of Nations (1922-1928) and the early activities of the OEEC Fiscal Committee (1956-1963), as well as on OECD efforts to increase international cooperation against tax evasion practices from the mid-1970s to the mid-1980s. In three cases, multilateral initiatives against tax evasion faced unyielding opposition by business interests and tax haven countries such as Switzerland. However, in order to explain the failure of the regulations, we have also to take into account the interests of big countries in maintaining offshore activities. Ultimately, the paper demonstrates how international organizations served as multipliers for dominant power relations on issues of international taxation. |
| Keywords: | History, Taxation, Tax havens, Switzerland, International organizations, OECD |
| JEL: | N00 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gnv:wpaper:unige:88348&r=iue |
| By: | Lorenz, Johannes |
| Abstract: | There are two ways for taxpayers to avoid paying taxes: legally, through tax optimization and illegally, through tax evasion. The government reacts by altering the law, and by conducting audits, respectively. These phenomena are modeled as a population game, a strategic interaction between all taxpayers: the more taxpayers optimize, the lower the optimization result as a consequence of the government tightening the tax law. The more taxpayers evade, the higher the risk of detection because of the tax agencies increasing the audit probability. If the government reacts to changed optimization behavior with too large a delay, an equilibrium tax law cannot be reached. Tax codes should be updated rapidly in order to avoid a permanent change of the tax law, which is costly both for the legislator and the taxpayers facing legal uncertainty. |
| Keywords: | tax avoidance,tax evasion,population games |
| JEL: | C73 H26 K34 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:upadvr:v7617&r=iue |
| By: | Anja Baum; Sanjeev Gupta; Elijah Kimani; Sampawende J Tapsoba |
| Abstract: | This paper revisits the effects of corruption on the state’s capacity to raise revenue, building on the existing empirical literature using new and more disaggregated data. We use a comprehensive dataset for 147 countries spanning 1995-2014, compiled by the IMF. It finds that—consistent with the existing literature—corruption is negatively associated with overall tax revenue, and most of its components. This relationship is predominantly influenced by the way corruption interacts with tax compliance. The establishment of large taxpayer offices improves tax compliance by dampening the perception of corruption, thereby boosting revenue. |
| Date: | 2017–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/255&r=iue |
| By: | Tomasz Michalik |
| Abstract: | The VAT gap, both on the European Union scale and that of particular member states (though not all of them) appeals to the imagination and awakens many extreme emotions. For it is difficult to accept that the level is so significant, and – what is more – in recent years it has narrowed quite insignificantly despite attempts to limit it. In the popular understanding, this gap is quite often identified exclusively with the consequences of fraud, but it has many more component elements, many of which have nothing to do with abuse. Still, this doesn’t change the face that it is precisely fraud and abuse that constitute a particularly significant element of the VAT gap. |
| Keywords: | Value Added Tax, tax fraud, tax evasion, tax non-compliance, tax avoidance, EU, Poland |
| JEL: | H26 H25 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:sec:mbanks:0147&r=iue |
| By: | Grzegorz Poniatowski; dr. Jaros³aw Neneman; Tomasz Michalik |
| Abstract: | Since 2009, despite constant growth in the tax base and only slight variations in effective rates, the trend in VAT revenue in Poland has been reversed, and inflows have become less stable. The ongoing decline in VAT collection and the increase in the uncertainty related to the main component of budget revenues is a very important problem, which in the light of growing budget spending may threaten the stability of public finances. Three experts: Grzegorz Poniatowski, dr. Jaros³aw Neneman and Tomasz Michalik examine the structure and the causes of the VAT gap as well as the legal context and possible methods of improving VAT compliance at national and European level. |
| Keywords: | Economics and Finance, Macroeconomics and Monetary Economics |
| JEL: | E E02 E5 E6 E42 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:sec:mbanks:0142&r=iue |
| By: | Joel CARIOLLE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Cyril CHALENDARD; Anne-Marie GEOURJON (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Bertrand LAPORTE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)) |
| Abstract: | Customs administrations in developing countries increasingly use risk-based techniques relying on data mining and statistical scoring. By demonstrating the value of using data analysis techniques to orient frontline controls so as to facilitate legal trade and combat fraud more effectively, these projects have helped promote a cultural change in these organizations. However, these risk management techniques may prove to be ineffective in assessing fraud risks based only on frauds detected by customs inspectors. In a context of moral hazard and low-performing customs administration, one way to address this weakness is to expand the approach by relying on other sources of information such as discrepancies in bilateral trade statistics. Several studies use these statistical discrepancies (mirror data) to identify fraudulent declarations and estimate their effects. By comparing Gabon's import customs data with discrepancies in its bilateral trade data, this paper stresses the usefulness of simultaneously analyzing customs fraud records and mirror trade statistics data. Such an analysis helps quantifying undetected fraud and therefore constitutes a valuable tool to target ex post audits. Then, based on the combination of these databases, the paper defines indicators to monitor the performance of customs controls. |
| Keywords: | Customs risk analysis, Performance of customs authorities, Customs fraud, Tax evasion, Administrative data, Mirror analysis. |
| JEL: | F13 D73 K42 H83 H26 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1899&r=iue |
| By: | Marcelo Arbex (Department of Economics, University of Windsor); Flavia Chein (São Paulo School of Economics, Getulio Vargas Foundation); Isabela Furtado (São Paulo School of Economics, Getulio Vargas Foundation); Enlinson Mattos (São Paulo School of Economics, Getulio Vargas Foundation) |
| Abstract: | In this paper we investigate how households time allocations decisions between formal and informal sectors are related to publicly provided goods with and without market substitutes. A simple static public provision model motivates our analysis. Households consume a normal private good and a quasi-private (education) good. Household needs some public utility services to consume the private good and supply labor to formal and informal sectors. Using data from the PNAD (National Household Sample Survey) for the period 2007-2015 we construct indexes of access to three groups of publicly provided goods: (I) basic infrastructure or public utility services, (II) basic education and (III) higher education. Our logit results show a positive effect of access to public education (basic and higher) on the probability of evasion. Differently from public utility services, that affect negatively the probability of evasion, the consumption of these goods present substitute in the private sector. We observe a stronger effect of access to publicly provided basic education comparing with higher education. This result may be related to the different quality of publicly provision of higher and basic education. Tobit results suggest a positive and significant effect only in the case of publicly provided education, i.e., an increase in the access or use of publicly provided education increases the supply of informal labor hours. |
| Keywords: | Education; Public Utility Services; Tax Evasion; Public Provision. |
| JEL: | J22 H26 H42 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1710&r=iue |
| By: | Joel CARIOLLE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Cyril CHALENDARD; Anne-Marie GEOURJON (Centre d'Etudes et de Recherches sur le Développement International(CERDI)); Bertrand LAPORTE (Centre d'Etudes et de Recherches sur le Développement International(CERDI)) |
| Abstract: | Customs administrations in developing countries increasingly use risk-based techniques relying on data mining and statistical scoring. By demonstrating the value of using data analysis techniques to orient frontline controls so as to facilitate legal trade and combat fraud more effectively, these projects have helped promote a cultural change in these organizations. However, these risk management techniques may prove to be ineffective in assessing fraud risks based only on frauds detected by customs inspectors. In a context of moral hazard and low-performing customs administration, one way to address this weakness is to expand the approach by relying on other sources of information such as discrepancies in bilateral trade statistics. Several studies use these statistical discrepancies (mirror data) to identify fraudulent declarations and estimate their effects. By comparing Gabon's import customs data with discrepancies in its bilateral trade data, this paper stresses the usefulness of simultaneously analyzing customs fraud records and mirror trade statistics data. Such an analysis helps quantifying undetected fraud and therefore constitutes a valuable tool to target ex post audits. Then, based on the combination of these databases, the paper defines indicators to monitor the performance of customs controls. |
| Keywords: | Customs risk analysis, Performance of customs authorities, Customs fraud, Tax evasion, Administrative data, Mirror analysis. |
| JEL: | F13 D73 K42 H83 H26 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1898&r=iue |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille); Antoine Malézieux (BETA - Bureau d'Economie Théorique et Appliquée - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Jason Shogren (Departement of Economics and Finance, University of Wyoming - UW - University of Wyoming) |
| Abstract: | Malgré un intérêt croissant pour les déterminants non-monétaires des comportements fiscaux (tax morale), la littérature récente apporte peu d'éléments empiriques sur le lien entre les caractéristiques de personnalité reliées à la moralité et la propension à l'évasion fiscale. Or de telles mesures sont nécessaires pour comprendre les canaux de transmission des dispositifs de lutte contre l'évasion fiscale. Pour pallier cette lacune, le présent article rend compte d'une expérience en laboratoire permettant d'observer à la fois les comportements de déclaration de revenu des participants et des mesures psychologiques issues de la littérature en psychométrie : soumission à la norme, empathie affective et cognitive, et propension à ressentir la honte et la culpabilité. Ces mesures sont combinées à l'aide d'une analyse en composantes principales afin d'en extraire les facteurs indépendants. Nos résultats montrent que la décision de frauder comme son intensité sont fortement liées à l'empathie affective, l'empathie cognitive et la dimension publique de la moralité (mesurée par la soumission à la norme et la propension à la honte). La propension à ressentir la culpabilité, en revanche, est sans effet. Surtout, le pouvoir explicatif global de ces mesures de moralité individuelles est relativement faible. Ce résultat remet en cause l'hypothèse d'une moralité fiscale intrinsèque, et met l'accent sur l'importance du contexte institutionnel pour comprendre les comportements d'évasion. |
| Keywords: | Evasion fiscale, traits de personalité |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01476519&r=iue |