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The Incentive to Declare Taxes and Tax Revenue: The Lottery Receipt Experiment in China

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  • Junmin Wan

    (Osaka University)

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    Abstract

    We examine the validity of a new system of taxation called lottery receipts in China theoretically and empirically. Tax collection is difficult as the government difficultly monitors the actual economic dealings. To bring out the private information on transaction known only to a seller and a buyer, the government has set up a lottery receipt system which has been tried out in many areas. If the net revenue from a lottery receipt is invested in pure public goods, the lottery receipt will been purchased even if the consumer has expected quasi-linear utility. By issuing a lottery receipt, the government may prevent tax evasion caused by conspiracies between consumers and firms and collect tax effectively. Estimation is performed based on panel data for different periods from a total of 37 districts in Beijing and Tianjin during 1998-2003. The lottery receipt experiment has significantly raised the business tax, the growths of business tax and total tax revenues.

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0625.pdf
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    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 06-25.

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    Length: 37 pages
    Date of creation: Sep 2006
    Date of revision:
    Handle: RePEc:osk:wpaper:0625

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    Web page: http://www.econ.osaka-u.ac.jp/
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    Related research

    Keywords: tax evasion; business tax; lottery receipt experiment; random trend (growth) model;

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    1. Papke, Leslie E., 1994. "Tax policy and urban development : Evidence from the Indiana enterprise zone program," Journal of Public Economics, Elsevier, Elsevier, vol. 54(1), pages 37-49, May.
    2. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262532484, December.
    3. Crane, Steven E & Nourzad, Farrokh, 1994. "An Empirical Analysis of Factors That Distinguish Those Who Evade on Their Tax Return from Those Who Choose Not to File a Return," Public Finance = Finances publiques, , , vol. 49(Supplemen), pages 106-16.
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    6. Andreoni, J. & Erard, B. & Feinstein, J., 1996. "Tax Compliance," Working papers, Wisconsin Madison - Social Systems 9610r, Wisconsin Madison - Social Systems.
    7. Horioka, Charles Yuji & Sekita, Shizuka, 2007. "Tax reform in Japan: The case of personal taxes," Japan and the World Economy, Elsevier, Elsevier, vol. 19(3), pages 380-392, August.
    8. James J. Heckman, 1989. "Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training," NBER Working Papers 2861, National Bureau of Economic Research, Inc.
    9. Christopher Bajada & Friedrich Schneider, 2005. "The Shadow Economies Of The Asia-Pacific," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 10(3), pages 379-401, October.
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    Cited by:
    1. Carla Marchese, 2007. "A Chinese Recipe for Curbing the Evasion of Commodity Taxes?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 5(3), pages 38-42, October.

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