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Targeting in tax behavior: Evidence from Rwandan firms

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  • Tourek, Gabriel

Abstract

This paper describes tax behavior among firms in a low-income country that diverges from traditional models of compliance. Using the universe of administrative filings in Rwanda, I find that many firms consistently pay identical amounts in income tax year after year. Evidence from a survey of filers, matched to administrative filings, suggests that constraints on documenting and verifying earnings motivates a heuristic of targeting past payment amounts. To illustrate the policy relevance of this behavior, I exploit an income tax reform to show that targeting can reconcile perverse responses to tax changes: when taxes are cut, firms relying on this heuristic on average persist in paying as much as they did before.

Suggested Citation

  • Tourek, Gabriel, 2022. "Targeting in tax behavior: Evidence from Rwandan firms," Journal of Development Economics, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:deveco:v:158:y:2022:i:c:s0304387822000700
    DOI: 10.1016/j.jdeveco.2022.102911
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    More about this item

    Keywords

    Economic history; Trade empirical; Firms; Policy reforms; Africa - macro;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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