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Destination taxation and evasion: Evidence from U.S. inter-state commodity flows

Author

Listed:
  • Fox, William F.
  • Luna, LeAnn
  • Schaur, Georg

Abstract

Tax evasion has been an important issue in the accounting literature for several decades, but the focus has been on corporate income taxes. We develop a new way to examine tax evasion that focuses on corporate transactions, rather than corporate profits. Specifically, we examine how commodity flows respond to destination sales taxes, allowing for tax evasion as a function of distance between trade partners. After accounting for transportation costs, we find that the effect of taxes decreases as distance increases. This is consistent with the notion that longer distances between trade partners hinder government oversight and increase the likelihood of successful tax evasion. Our results are robust with respect to outliers, strategic neighbor effects, information sharing agreements and other re-specifications. These results are important to policymakers because they evidence the difficulty of enforcing destination taxation in open economies such as U.S. states and the European Union.

Suggested Citation

  • Fox, William F. & Luna, LeAnn & Schaur, Georg, 2014. "Destination taxation and evasion: Evidence from U.S. inter-state commodity flows," Journal of Accounting and Economics, Elsevier, vol. 57(1), pages 43-57.
  • Handle: RePEc:eee:jaecon:v:57:y:2014:i:1:p:43-57
    DOI: 10.1016/j.jacceco.2013.12.001
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:itaxpf:v:24:y:2017:i:5:d:10.1007_s10797-016-9422-3 is not listed on IDEAS
    2. David R. Agrawal & William F. Fox, 2017. "Taxes in an e-commerce generation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 903-926, September.

    More about this item

    Keywords

    Taxation; Evasion; Multijurisdictional;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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