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Digitalization to improve tax compliance: Evidence from VAT e-Invoicing in Peru

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  • Bellon, Matthieu
  • Dabla-Norris, Era
  • Khalid, Salma
  • Lima, Frederico

Abstract

This paper examines the impact of switching from paper to electronic invoicing on firm tax compliance and performance using quasi-experimental variation in the roll-out of VAT e-invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and VAT liabilities by over 5 percent in the first year after adoption. The impact is concentrated among small firms and sectors with higher rates of noncompliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. However, we also find that existing stocks of VAT credits were used to offset the reform’s positive effects on VAT collection, suggesting that digital tools such as e-invoicing would need to be complemented by other reforms to improve revenue mobilization.

Suggested Citation

  • Bellon, Matthieu & Dabla-Norris, Era & Khalid, Salma & Lima, Frederico, 2022. "Digitalization to improve tax compliance: Evidence from VAT e-Invoicing in Peru," Journal of Public Economics, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:pubeco:v:210:y:2022:i:c:s0047272722000639
    DOI: 10.1016/j.jpubeco.2022.104661
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    Cited by:

    1. Theodoros Kounadeas, 2023. "The Effectiveness of Digital Payments in Tackling Tax Evasion in Greece," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 3-21.
    2. Das, Satadru & Gadenne, Lucie & Nandi, Tushar & Warwick, Ross, 2022. "Does going cashless make you tax-rich? Evidence from India's demonetization experiment," The Warwick Economics Research Paper Series (TWERPS) 1393, University of Warwick, Department of Economics.
    3. Bellon, Matthieu & Dabla-Norris, Era & Khalid, Salma, 2023. "Technology and tax compliance spillovers: Evidence from a VAT e-invoicing reform in Peru," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 756-777.
    4. Mascagni, Giulia & Mengistu, Andualem T. & Woldeyes, Firew B., 2021. "Can ICTs increase tax compliance? Evidence on taxpayer responses to technological innovation in Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 172-193.
    5. Glenn P. Jenkins & Siamand Hesami & Osaid Alshamleh & Anastasiya Yarygina & Carola Pessino, 2023. "A Cost-Benefit Analysis Methodology for Administrative Prefilling of Value-Added Tax Returns: An Application for Chile," Development Discussion Papers 2023-10, JDI Executive Programs.
    6. Das, Satadru & Gadenne, Lucie & Nandi, Tushar & Warwick, Ross, 2023. "Does going cashless make you tax-rich? Evidence from India’s demonetization experiment," Journal of Public Economics, Elsevier, vol. 224(C).
    7. Marwin Heinemann & Wojciech Stiller, 2023. "Digitalization and Cross-Border Tax Fraud: Evidence from E-Invoicing in Italy," CESifo Working Paper Series 10227, CESifo.
    8. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," CERDI Working papers hal-02979897, HAL.
    9. Cyril Chimilila & Remidius Ruhinduka & Vincent Leyaro, 2023. "The design and revenue impact of a tax receipts lottery: A lab experiment in Tanzania," Discussion Papers 2023-02, University of Nottingham, CREDIT.
    10. Jean-François Brun & Gérard Chambas & Jules Tapsoba & Abdoul-Akim Wandaogo, 2020. "Are ICT's boosting tax revenues? Evidence from developing countries," Working Papers hal-02979897, HAL.
    11. Okunogbe,Oyebola Motunrayo & Santoro,Fabrizio, 2021. "The Promise and Limitations of Information Technology for Tax Mobilization," Policy Research Working Paper Series 9848, The World Bank.
    12. von Haldenwang, Christian, 2020. "Digitalising the fiscal contract: An interdisciplinary framework for empirical inquiry," IDOS Discussion Papers 20/2020, German Institute of Development and Sustainability (IDOS).
    13. Bruno Emmanuel Ongo Nkoa & Jacques Simon Song, 2022. "Les canaux de transmission des effets des TIC sur la mobilisation des recettes fiscales en Afrique," African Development Review, African Development Bank, vol. 34(S1), pages 80-101, July.

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    More about this item

    Keywords

    Electronic invoicing; VAT; Tax compliance; Digitalization;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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