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Strategic or Confused Firms? Evidence from "Missing" Transactions in Uganda

Author

Listed:
  • Miguel Almunia
  • Jonas Hjort
  • Justine Knebelmann
  • Lin Tian

Abstract

Are firms sophisticated maximizers, or do they consistently make errors? Using transaction-level data from Ugandan value-added tax (VAT) returns, we show that sellers and buyers report different amounts 79% of the time, despite invoices being easily cross-checked. We estimate that 25% of firms are disadvantageous misreporters—they systematically misreport own sales and purchases such that their tax liability increases—while 75% are advantageous misreporters. Many firms—especially disadvantageous misreporters—fail to report imported inputs they themselves reported at Customs, increasing their VAT liability. On net, unilateral VAT misreporting cost Uganda about US$384 million in foregone 2013-2016 tax revenue

Suggested Citation

  • Miguel Almunia & Jonas Hjort & Justine Knebelmann & Lin Tian, 2021. "Strategic or Confused Firms? Evidence from "Missing" Transactions in Uganda," NBER Working Papers 29059, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29059
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    Citations

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    Cited by:

    1. Gadenne, Lucie & Nandi, Tushar K. & Rathelot, Roland, 2019. "Taxation and Supplier Networks : Evidence from India," The Warwick Economics Research Paper Series (TWERPS) 1208, University of Warwick, Department of Economics.
    2. Bachas, Pierre & Gadenne, Lucie & Jensen, Anders, 2020. "Informality, Consumption Taxes and Redistribution," The Warwick Economics Research Paper Series (TWERPS) 1277, University of Warwick, Department of Economics.
    3. Denis Cogneau & Yannick Dupraz & Justine Knebelmann & Sandrine Mesplé-Somps, 2021. "Taxation in Africa from Colonial Times to Present Evidence from former French colonies 1900-2018," PSE Working Papers halshs-03420664, HAL.
    4. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    5. Mazhar Waseem & Mazhar Waseem, 2020. "Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax," CESifo Working Paper Series 8231, CESifo.
    6. Jonas Hjort & Vinayak Iyer & Golvine de Rochambeau, 2020. "Informational Barriers to Market Access: Experimental Evidence from Liberian Firms," SciencePo Working papers hal-03389180, HAL.
    7. 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).
    8. repec:hal:spmain:info:hdl:2441/6jahov5tde8vt9aplqrgg3trl4 is not listed on IDEAS
    9. Germ'an Reyes, 2022. "Coarse Wage-Setting and Behavioral Firms," Papers 2206.01114, arXiv.org, revised Mar 2024.
    10. 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.
    11. Mazhar Waseem, 2019. "Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax," Economics Discussion Paper Series 1913, Economics, The University of Manchester.
    12. repec:hal:wpspec:info:hdl:2441/6jahov5tde8vt9aplqrgg3trl4 is not listed on IDEAS

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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