No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax
AbstractTax evasion generates billions of dollars of losses in government revenue and creates large distortions, especially in developing countries. Claims that the VAT facilitates tax enforcement by generating paper trails on transactions between firms have contributed to widespread VAT adoption worldwide, but there is little empirical evidence about this mechanism. This paper analyzes the role of third party information for VAT enforcement through two randomized experiments among over 400,000 Chilean firms. Announcing additional monitoring has less impact on transactions that are subject to a paper trail, indicating the paper trail's preventive deterrence effect. Tax enforcement leads to strong spillovers up the VAT chain, increasing compliance by firms' suppliers. These findings confirm that when evasion is taken into account, significant differences emerge between otherwise equivalent forms of taxation.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19199.
Date of creation: Jul 2013
Date of revision:
Note: DEV PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-07-15 (Accounting & Auditing)
- NEP-ALL-2013-07-15 (All new papers)
- NEP-IUE-2013-07-15 (Informal & Underground Economics)
- NEP-PBE-2013-07-15 (Public Economics)
- NEP-PUB-2013-07-15 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paulo Guimarães & Pedro Portugal, 2009.
"A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects,"
Working Papers, Banco de Portugal, Economics and Research Department
w200909, Banco de Portugal, Economics and Research Department.
- Guimaraes, Paulo & Portugal, Pedro, 2009. "A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects," IZA Discussion Papers 3935, Institute for the Study of Labor (IZA).
- Raymond Fisman & Shang-Jin Wei, 2004.
"Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 112(2), pages 471-500, April.
- Raymond Fisman & Shang-Jin Wei, 2001. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," NBER Working Papers 8551, National Bureau of Economic Research, Inc.
- Fisman, Raymond & Wei, Shang-Jin, 2001. "Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3089, C.E.P.R. Discussion Papers.
- Roger Gordon & Wei Li, 2005.
"Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation,"
NBER Working Papers
11267, National Bureau of Economic Research, Inc.
- Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, Elsevier, vol. 93(7-8), pages 855-866, August.
- Engström, Per & Hesselius, Patrik, 2007. "The information method - theory and application," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2007:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, Econometric Society, vol. 79(3), pages 651-692, 05.
- Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 31(2), pages 762-830, June.
- Bird,Richard & Gendron,Pierre-Pascal, 2007.
"The VAT in Developing and Transitional Countries,"
Cambridge Books, Cambridge University Press,
Cambridge University Press, number 9780521877657.
- Emran, M. Shahe & Stiglitz, Joseph E., 2005.
"On selective indirect tax reform in developing countries,"
Journal of Public Economics, Elsevier,
Elsevier, vol. 89(4), pages 599-623, April.
- M. Shahe Emran & Joseph E. Stiglitz, 2002. "On Selective Indirect Tax Reform in Developing Countries," International Trade, EconWPA 0210003, EconWPA.
- Wojciech Kopczuk & Joel Slemrod, 2006. "Putting Firms into Optimal Tax Theory," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 130-134, May.
- Paul E. Carrillo & M. Shahe Emran & Anita Rivadeneira, 2011. "Do Cheaters Bunch Together? Profit Taxes, Withholding Rates and Tax Evasion," Working Papers, The George Washington University, Institute for International Economic Policy 2011-03, The George Washington University, Institute for International Economic Policy.
- Reinikka, Ritva & Svensson, Jakob, 2004. "The power of information : evidence from a newspaper campaign to reduce capture," Policy Research Working Paper Series, The World Bank 3239, The World Bank.
- Joel Slemrod & Thor Olav Thoresen & Erlend Eide Bø, 2013.
"Taxes on the Internet: Deterrence Effects of Public Disclosure,"
CESifo Working Paper Series
4107, CESifo Group Munich.
- Erlend E. Bø & Joel Slemrod & Thor O. Thoresen, 2014. "Taxes on the internet. Deterrence effects of public disclosure," Discussion Papers, Research Department of Statistics Norway 770, Research Department of Statistics Norway.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.