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on Informal and Underground Economics |
| By: | Julie Berry Cullen; Nicholas Turner; Ebonya Washington |
| Abstract: | We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes. We first use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically. Next, we move to the county level, and measure tax behavior as elections, decided by the voting behavior in swing-states, push voters in partisan counties into and out of alignment with the party of the president. Using IRS data, we find that reported taxable income increases as a county moves into alignment, with the increases concentrated in income sources that are easily evaded, due to lack of third-party reporting. Corroborating the view that evasion falls, potentially suspect EITC claims and audit rates also fall. Our results provide real-world evidence that a positive outlook on government lowers tax evasion. |
| Keywords: | tax evasion, tax morale |
| JEL: | D72 H24 H26 H30 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6905&r=iue |
| By: | P. Aghion; U. Akcigit; M. Lequien; S. Stantcheva |
| Abstract: | We study how strongly individuals respond to tax simplicity and how they learn about the complexities of the tax system. We use new French tax returns data on the self-employed from 1994 to 2012. France has three fiscal regimes for the self-employed, which differ in their monetary tax incentives and in their tax simplicity. These regimes are subject to eligibility thresholds: we find large excess masses (bunching) right below the latter. The regimes impact different agents heterogeneously and have changed extensively over time. We estimate a large value for tax simplicity of up to 650 euros per year per individual. Tax complexity has sizable costs: agents are not immediately able to understand what the right regime choice is, leave significant money on the table, and learn over time. These costs are “regressive”, impacting more the uneducated, low income, and low skill agents. |
| Keywords: | Taxation, personal income and business taxes, tax evasion, income elasticity. |
| JEL: | H21 H24 H25 H26 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:665&r=iue |
| By: | Glenn P. Jenkins (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus); Chun-Yan Kuo (Senior Fellow, John Deutsch International, Department of Economics, Queen’s University, Canada,) |
| Abstract: | In this paper, we develop a model to simulate policies and revenues for a value-added taxes (VAT) system in countries that have an indirect tax system containing sales, excise taxes, and tariffs. An application of the model is carried out for Nepal, which has recently introduced the VAT to replace its sales tax system and rationalize its excise and tariff systems. The study shows that, in a developing country, tax policies that might seem very realistic and politically noncontroversial are likely to yield a very narrow tax base. If a government of a developing country wants to rely more on the VAT over time, it must move aggressively to broaden the base and enhance compliance. |
| Keywords: | :VAT, reform, revenue, model, Asia, Nepal |
| URL: | http://d.repec.org/n?u=RePEc:qed:dpaper:5512&r=iue |
| By: | Cabrera, José María; Cid, Alejandro; Bernatzky, Marianne Bernatzky |
| Abstract: | This is the first paper to analyze the effects of intense personal assistance on the compliance with labor regulation, within a population of deeply disadvantaged informal workers, using a field experiment. We randomly assign one-on-one assistance to these workers, and, within this treatment group, we randomly assign money to cover the cost of fulfilling the legal requirements to get a permit to work on the streets. One month after the intervention, we find that a worker who receives one-on-one assistance is three times more likely to comply with the legal documentation required by the government than a worker in the control group. We also find that a worker who receives both one-on-one assistance and cost coverage is four times more likely to comply with the legal requirements. The findings of this study shed light on strategies to help highly vulnerable workers to comply with labor regulations. |
| Keywords: | case management; one-on-one assistance; randomized control trial; field experiment; labor regulation. |
| JEL: | C93 D04 D46 I30 J62 |
| Date: | 2016–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84639&r=iue |
| By: | Cid, Alejandro; Cabrera, José María |
| Abstract: | We analyze the results of a policy of massive allocation of usufruct rights to cuidacoches: persons performing surveillance of parked vehicles in the streets. Surprisingly, despite the low cost and the considerable benefits to legally acquiring the right of use on the block, half of the potential beneficiaries have rejected the subscription to the program. In order to understand this market and the mobility between being in the legal framework or outside the law, we built a unique database containing economic and sociodemographic information from cuidacoches in Montevideo. We highlight four findings: the heterogeneity in the reasons for accepting or rejecting the legal framework; the protection of the right of usufruct on the block as the main perceived benefit of complying with the legal framework; the desire to change jobs for the vast majority, and the low saving capacity. |
| Keywords: | Usufruct rights; property rights; social mobility; aspirations; labor market |
| JEL: | I3 J4 O12 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84736&r=iue |
| By: | Boonzaaier, Wian; Harju, Jarkko; Matikka, Tuomas; Pirttilä, Jukka |
| Abstract: | We study the responsiveness of small and medium-sized firms to corporate income taxes using population-wide administrative data from South Africa. We find sizable bunching of firms at the corporate income thresholds where the corporate tax rate increases, implying active responses to corporate income taxes. The observed bunching is very sharp, and reacts immediately to changes in the location of the kink points. These observations suggest that a sizable part of the response is driven by reporting responses rather than real economic behavior. We find indicative evidence that reporting behavior is linked with underreporting of sales and legal tax planning activities. |
| Keywords: | corporate taxation, small firms, emerging economies, bunching, Social security, taxation and inequality, H21, H25, H32, O12, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:85&r=iue |
| By: | Deepankar Basu (Department of Economics, University of Massachusetts - Amherst) |
| Abstract: | The challenge of employment in the Indian economy, especially after it growth acceleration since the mid-1980s, relates to its quality rather than its quantity. While employment growth has kept pace with the labour force over the long run, what has grown is informal employment. The coexistence of rapid capital accumulation, robust output growth and lack of growth of formal employment can be understood using the well-known Harris-Todaro model of a dual economy. This framework highlights the key role of the wage gap between the modern and traditional sectors as a determinant of urban informal employment. Hence, one of the most effective and egalitarian ways to address the employment problem is to adopt policies to increase agricultural productivity and income, which can reduce the wage gap. Since crop yields in India are far lower than many other countries in the world, including China, Brazil, and Bangladesh, there is ample scope for land-augmenting and labour-absorbing technological change in Indian agriculture. Efforts to ramp up industrialization should be taken up in earnest only after the wage gap has been narrowed significantly. |
| Keywords: | employment, India, Harris-Todaro, agriculture |
| JEL: | J21 O10 O13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2018-02&r=iue |
| By: | Shesadri Banerjee (Madras Institute of Development Studies); Parantap Basu (Durham University, Durham University Business School); Chetan Ghate (Indian Statistical Institute); Pawan Gopalakrishnan (Reserve Bank of India); Sargam Gupta (Indian Statistical Institute) |
| Abstract: | We build and calibrate a New Keynesian monetary business cycle model to theIndian economy to understand why the aggregate demand channel of monetary transmission is weak. Our main Önding is that base money shocks have a larger and more persistent effect on output than an interest rate shock, as in the data. We show that Önancial repression, in the form of a statutory liquidity ratio and administered interest rates, does not weaken monetary transmission. This is contrary to the consensus view in policy discussions on Indian monetary policy. We show that the presence of an informal sector hinders monetary transmission. |
| Keywords: | Monetary Business Cycles, Monetary Transmission, Ináation Targeting. |
| JEL: | E31 E32 E44 E52 E63 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:dur:cegapw:2018_01&r=iue |
| By: | Geovanny Castro; Edy Lorena Burbano; Maribel Castillo (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali) |
| Abstract: | The main objective of this paper is to analyze the effect of education, age, access to ICTs and physical and financial assets, as well as other personal and socioeconomic characteristics, on the probability of being self-employed, formal and informal. For the achievement of this purpose, information will be used at the urban level for the 21 main cities in Colombia, the Great Integrated Household Survey –GEIH–, the National Administrative Department of Statistics –DANE–, for the year 2010, and the Colombian Longitudinal Survey of the Universidad de los Andes –ELCA–, for the year 2013, applying the models that have a qualitative binomial and multinomial dependent variable, correcting the selection bias. As main results, it was found that physical assets and access to credit have a positive marginal effect on the probability of being self-employed. On the other hand, the marginal effect of education was negative, at a lower educational level, the greater the probability of self-employment, especially the informal one. The version here presented corresponds to the updated study. |
| Keywords: | Labor Economics, self-employed, Binomial and Multinomial Models, Colombia |
| JEL: | C13 C51 J01 J24 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ddt:wpaper:35&r=iue |