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E-invoicing, tax audits and VAT compliance

Author

Listed:
  • Kotsogiannis, Christos
  • Salvadori, Luca
  • Karangwa, John
  • Murasi, Innocente

Abstract

Difficult to find another policy shift that has promised as much for tax compliance in developing countries as digitalization. Yet the evidence on its impact is scant. Using the universe of tax filings in Rwanda over the period 2012–2019, this paper investigates the extent to which digitalization (in the form of e-invoicing) has impacted on VAT compliance and in particular the effectiveness of tax audits. The evidence suggests that on the aggregate e-invoicing adoption has increased firms’ net VAT payments and has improved the efficiency of VAT audits. It is also shown that e-invoicing has a sizeable impact on VAT liabilities reported by audited firms, with this impact being attributed to tax audits being more efficient rather than to VAT registered firms becoming more compliant following their adoption of e-invoicing.

Suggested Citation

  • Kotsogiannis, Christos & Salvadori, Luca & Karangwa, John & Murasi, Innocente, 2025. "E-invoicing, tax audits and VAT compliance," Journal of Development Economics, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:deveco:v:172:y:2025:i:c:s0304387824001524
    DOI: 10.1016/j.jdeveco.2024.103403
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    Cited by:

    1. Burak Uras & Tulio Bouzas, 2026. "The Price of Traceability: E-Payments, Tax Compliance, and Policy," Department of Economics Working Papers 2026_102, Department of Economics, Williams College.
    2. Bouzas, Tulio & Uras, Burak, 2026. "The Price of Traceability: E-Payments, Tax Compliance, and Policy," Other publications TiSEM b35a98be-6600-4dcd-8010-b, Tilburg University, School of Economics and Management.

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    Keywords

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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