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Tax enforcement using a hybrid between self- and third-party reporting

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  • Clifford, Sarah
  • Mavrokonstantis, Panos

Abstract

We study a tax enforcement policy combining elements of self- and third-party reporting. Taxpayers self-report to the authority but must file documentation issued by a third-party to corroborate claims. Exploiting salary-dependent cutoffs governing documentation requirements when claiming deductions for charitable contributions in Cyprus, we estimate that deductions increase by £0.7 when taxpayers can claim £1 more without documentation. Second, using a retroactive reform we find that at least 64% of the response is purely a reporting adjustment representing mainly over-reporting of deductions. Finally, reporting rules drive the behaviour of many taxpayers who display little responsiveness to financial incentives for giving.

Suggested Citation

  • Clifford, Sarah & Mavrokonstantis, Panos, 2021. "Tax enforcement using a hybrid between self- and third-party reporting," Journal of Public Economics, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:pubeco:v:203:y:2021:i:c:s0047272721001559
    DOI: 10.1016/j.jpubeco.2021.104519
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    1. Garz, Marcel & Schneider, Andrea, 2023. "Data sharing and tax enforcement: Evidence from short-term rentals in Denmark," Regional Science and Urban Economics, Elsevier, vol. 101(C).

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