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Detecting envelope wages with e-billing information

Author

Listed:
  • Andrea Lopez-Luzuriaga

    (Universidad del Rosario)

  • Monica Calijuri

    (Inter-American Development Bank)

  • Carola Pessino

    (Inter-American Development Bank)

  • Simeon Schächtele

    (Inter-American Development Bank)

  • Ubaldo Gonzalez

    (Inter-American Development Bank)

  • Carla Chamorro

    (Servicio de Rentas Internas Ecuador)

Abstract

We use information from the electronic billing system to estimate the underreporting of income of private sector employees. We follow an expenditure-based methodology using the consumption of public and private sector employees for similar levels of reported income. We find that private sector employees underreport between 7 and 9% of their income in Ecuador. The size of the underreporting gap is negatively correlated with the number of employees at the firm, consistent with different risks and administrative costs of ‘envelope wages’ in small versus large firms.

Suggested Citation

  • Andrea Lopez-Luzuriaga & Monica Calijuri & Carola Pessino & Simeon Schächtele & Ubaldo Gonzalez & Carla Chamorro, 2024. "Detecting envelope wages with e-billing information," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(1), pages 26-65, February.
    • Handle: RePEc:kap:itaxpf:v:31:y:2024:i:1:d:10.1007_s10797-023-09811-y
    DOI: 10.1007/s10797-023-09811-y
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    More about this item

    Keywords

    Income tax; Evasion; Electronic billing;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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