IDEAS home Printed from https://ideas.repec.org/a/tek/journl/v3y2014i2p1-26.html
   My bibliography  Save this article

Informal Payments to the Tax Collector in Transition Countries

Author

Listed:
  • John E. Anderson

    (Department of Economics, 348 College of Business Administration, University of Nebraska-Lincoln, Lincoln, Nebraska, USA 68588-0489)

Abstract

In this paper, I empirically examine survey data on the likelihood and frequency of firms’ having to make informal payments or gifts to government officials in transition countries. The firm-level survey data are from the EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS) for enterprises in transition economies of Europe and Central Asia, including Turkey. Characteristics of firms are used as explanatory variables along with country characteristics to control for the stage of economic development and current economic conditions at the time the survey data were collected. Probit and selection models of tax inspections, tax-compliance efforts, and firms' informal payments are estimated. The empirical evidence indicates that several specific corporate characteristics influence the likelihood of tax inspections, including employment and the location of the company. Both corporate and country characteristics determine the likelihood of tax officials' requests for informal payments. Importantly, tax-compliance costs significantly affect informal payments.

Suggested Citation

  • John E. Anderson, 2014. "Informal Payments to the Tax Collector in Transition Countries," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 1-26, May.
    • Handle: RePEc:tek:journl:v:3:y:2014:i:2:p:1-26
    as

    Download full text from publisher

    File URL: http://ekonomitek.org/pdffile/no8_07_makale1_anderson.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Joulfaian, 2009. "Bribes and Business Tax Evasion," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 227-244, December.
    2. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
    3. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan.
    4. Cremer, H. & Marchand, M. & Pestieau, P., 1990. "Evading, auditing and taxing : The equity-compliance tradeoff," Journal of Public Economics, Elsevier, vol. 43(1), pages 67-92, October.
    5. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel & Schankerman, Mark, 2000. "Measuring governance, corruption, and State capture - how firms and bureaucrats shape the business environment in transition economies," Policy Research Working Paper Series 2312, The World Bank.
    6. Kaplow, Louis, 1990. "Optimal taxation with costly enforcement and evasion," Journal of Public Economics, Elsevier, vol. 43(2), pages 221-236, November.
    7. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.
    8. Wieneke, Axel & Gries, Thomas, 2011. "SME performance in transition economies: The financial regulation and firm-level corruption nexus," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 221-229, June.
    9. Andrei Shleifer & Daniel Treisman, "undated". "Normal Countries: The East 25 Years After Communism," Working Paper 204036, Harvard University OpenScholar.
    10. Cornes,Richard, 1992. "Duality and Modern Economics," Cambridge Books, Cambridge University Press, number 9780521336017.
    11. Richard E. Ericson, 1991. "The Classical Soviet-Type Economy: Nature of the System and Implications for Reform," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 11-27, Fall.
    12. Mr. Vito Tanzi & Mr. Hamid R Davoodi, 2000. "Corruption, Growth, and Public Finances," IMF Working Papers 2000/182, International Monetary Fund.
    13. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel, 2003. "Seize the state, seize the day: state capture and influence in transition economies," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 751-773, December.
    14. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    15. Tanzi, Vito & Zee, Howell H., 2000. "Tax Policy for Emerging Markets: Developing Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 299-322, June.
    16. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 995-1025.
    17. Carlin, Wendy & Schaffer, Mark E & Seabright, Paul, 2007. "Where Are the Real Bottlenecks? Evidence from 20,000 Firms in 60 Countries about the Shadow Costs of Constraints to Firm Performance," IZA Discussion Papers 3059, Institute of Labor Economics (IZA).
    18. Mr. George C. Tsibouris & Mr. Vito Tanzi, 2000. "Fiscal Reform Over Ten Years of Transition," IMF Working Papers 2000/113, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John E. Anderson, 2005. "Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia," William Davidson Institute Working Papers Series wp800, William Davidson Institute at the University of Michigan.
    2. Manamba Epaphra, & John Massawe,, 2017. "Corruption, governance and tax revenues in Africa," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(4), pages 439-467, October.
    3. Anastasiou Athanasios & Kalligosfyris Charalampos & Kalamara Eleni, 2021. "Determinants of tax evasion in Greece: Econometric analysis of co-integration and causality, variance decomposition and impulse response analysis," Bulletin of Applied Economics, Risk Market Journals, vol. 8(1), pages 29-57.
    4. Nancy Birdsall & Liliana Rojas-Suarez (ed.), 2004. "Financing Development: The Power of Regionalism," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 359, October.
    5. Yan Leung Cheung & P. Raghavendra Rau & Aris Stouraitis, 2012. "How much do firms pay as bribes and what benefits do they get? Evidence from corruption cases worldwide," NBER Working Papers 17981, National Bureau of Economic Research, Inc.
    6. Evgeny Yakovlev & Ekaterina Zhuravskaya, 2009. "State Capture: From Yeltsin to Putin," International Economic Association Series, in: János Kornai & László Mátyás & Gérard Roland (ed.), Corruption, Development and Institutional Design, chapter 2, pages 24-36, Palgrave Macmillan.
    7. Garcia Penalosa, Cecilia & Turnovsky, Stephen J., 2005. "Second-best optimal taxation of capital and labor in a developing economy," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1045-1074, June.
    8. Gauthier, Bernard & Goyette, Jonathan & Kouamé, Wilfried A.K., 2021. "Why do firms pay bribes? Evidence on the demand and supply sides of corruption in developing countries," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 463-479.
    9. Katherine Cuff & Nicolas Marceau & Steeve Mongrain & Joanne Roberts, 2009. "Optimal Policies and the Informal Sector," Department of Economics Working Papers 2009-14, McMaster University.
    10. Martin Besfamille & Cecilia Parlatore Siritto, 2009. "Modernization of Tax Administrations and Optimal Fiscal Policies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(6), pages 897-926, December.
    11. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 284-318.
    12. Tahseen Ajaz & Eatzaz Ahmad, 2010. "The Effect of Corruption and Governance on Tax Revenues," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 405-417.
    13. Anderson, John E., 2019. "Access to land and permits: Firm-level evidence of impediments to development in transition countries," Journal of Economics and Business, Elsevier, vol. 101(C), pages 38-57.
    14. Steve Billon & Robert Gillanders, 2016. "State ownership and corruption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(6), pages 1074-1092, December.
    15. Serra, Pablo, 2003. "Measuring the Performance of Chile’s Tax Administration," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(2), pages 373-383, June.
    16. Leandro Arozamena & Martin Besfamille & Pablo Sanguinetti, 2010. "Optimal taxes and penalties when the government cannot commit to its audit policy," Department of Economics Working Papers 2010-10, Universidad Torcuato Di Tella.
    17. Errol D'souza, 2016. "A Theory of Tax Evasion in Developing Countries," Working Papers id:11040, eSocialSciences.
    18. Teuea Toatu, 2002. "Unravelling the Pacific Paradox," International and Development Economics Working Papers idec02-2, International and Development Economics.
    19. Mahdavi, Saeid, 2008. "The level and composition of tax revenue in developing countries: Evidence from unbalanced panel data," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 607-617, October.
    20. D'Souza, Errol, 2016. "A Theory Of Tax Evasion In Developing Countries," IIMA Working Papers WP2016-03-37, Indian Institute of Management Ahmedabad, Research and Publication Department.

    More about this item

    Keywords

    Tax collection; informal payments; gifts; bribes; corruption; transition economy;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tek:journl:v:3:y:2014:i:2:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ercan Uygur (email available below). General contact details of provider: https://edirc.repec.org/data/tekkkea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.