Taxes and bribery: The role of monitoring, bargaining power and red tape
AbstractThis paper investigates the negotiation over bribe and tax payments during the tax collection process in poor countries. We build a simple model where tax officials and firms bargain over bribes to let firms evade part of their taxes. Using a unique dataset on Ugandan firms we test the predictions of the model. We find significant and robust effects of effective tax payments, tax obligations, red tape costs and firm's bargaining power on bribe payments. Taking into account the endogenous relationship between taxes paid and bribes, we find a significant and negative relationship between these two variables. A policy that would increase incentives to pay taxes per employee by 7% could at the same time decrease the level of bribes per employee by at least 1%.
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Bibliographic InfoPaper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 12-08.
Length: 31 pages
Date of creation: Apr 2012
Date of revision:
Corruption; Tax evasion; Tax administration; Red Tape; Bargaining Power;
Find related papers by JEL classification:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-05-29 (Accounting & Auditing)
- NEP-ALL-2012-05-29 (All new papers)
- NEP-IUE-2012-05-29 (Informal & Underground Economics)
- NEP-PBE-2012-05-29 (Public Economics)
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.:
- Bernard Gauthier & Ritva Reinikka, 2006.
"Shifting Tax Burdens through Exemptions and Evasion: an Empirical Investigation of Uganda,"
Journal of African Economies,
Centre for the Study of African Economies (CSAE), vol. 15(3), pages 373-398, September.
- Gauthier, Bernard & Reinikka, Ritva, 2001. "Shifting tax burdens through exemptions and evasion - an empirical investigation of Uganda," Policy Research Working Paper Series 2735, The World Bank.
- Laszlo Goerke, 2008.
"Bureaucratic corruption and profit tax evasion,"
Economics of Governance,
Springer, vol. 9(2), pages 177-196, May.
- Sanyal, Amal & Gang, Ira N & Goswami, Omkar, 2000.
" Corruption, Tax Evasion and the Laffer Curve,"
Springer, vol. 105(1-2), pages 61-78, October.
- Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
- Chander, Parkash & Wilde, Louis, 1992. "Corruption in tax administration," Journal of Public Economics, Elsevier, vol. 49(3), pages 333-349, December.
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