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Non-compliance notifications and taxpayer strategic behavior: evidence from Ecuador

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  • Gonzalo E. Sánchez

    (Escuela Superior Politécnica del Litoral, ESPOL)

Abstract

This paper examines the effect of enforcement on taxpayer behavior using administrative data from Ecuador. To overcome confounding factors, a regression discontinuity design that exploits a discrete increase in the probability of receiving a non-compliance notification is used. Results indicate that the notification significantly increases reported taxes but does not affect tax revenues. The evidence suggests that refiling explains this situation. Additional findings indicate that this intervention also increases taxes reported in the year following it and that some taxpayers strategically attempt to evade taxes while trying to avoid being notified. Collectively, these findings suggest that continuous monitoring and limiting refiling might reduce tax evasion, especially in developing countries.

Suggested Citation

  • Gonzalo E. Sánchez, 2022. "Non-compliance notifications and taxpayer strategic behavior: evidence from Ecuador," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 627-666, June.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:3:d:10.1007_s10797-021-09677-y
    DOI: 10.1007/s10797-021-09677-y
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    Cited by:

    1. Gómez-Rámirez, Leopoldo & Sánchez, Gonzalo E., 2023. "On the need to anticipate behavioral responses to policies: the case of multiple refilings on taxpayer behavior in Ecuador," MPRA Paper 117825, University Library of Munich, Germany.
    2. Kasper, Matthias & Rablen, Matthew D., 2023. "Tax compliance after an audit: Higher or lower?," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 157-171.

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    More about this item

    Keywords

    Tax compliance; Tax enforcement; Strategic behavior; Regression discontinuity;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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