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Strategic or Confused Firms? Evidence from “Missing†Transactions in Uganda

Author

Listed:
  • Miguel Almunia

    (CUNEF University and CEPR)

  • Jonas Hjort

    (University College London, BREAD, and CEPR)

  • Justine Knebelmann

    (MIT and J-PAL)

  • Lin Tian

    (INSEAD and CEPR)

Abstract

Are firms sophisticated maximizers, or do they appear to make mistakes? Using transaction data from Ugandan value-added tax returns, we show that sellers and buyers report different amounts 79% of the time, despite invoices being easily cross-checked. Our estimates suggest that most firms are “advantageous misreporters,†but that 25% are “disadvantageous misreporters†who systematically overreport own sales minus purchases such that their tax liability increases. Similarly, many firms—especially disadvantageous misreporters—fail to VAT-report imported inputs they themselves reported at Customs, increasing their liability. On net, unilateral VAT misreporting cost Uganda about US$384 million in foregone 2013–2016 tax revenue.

Suggested Citation

  • Miguel Almunia & Jonas Hjort & Justine Knebelmann & Lin Tian, 2024. "Strategic or Confused Firms? Evidence from “Missing†Transactions in Uganda," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 256-265, January.
    • Handle: RePEc:tpr:restat:v:106:y:2024:i:1:p:256-265
    DOI: 10.1162/rest_a_01180
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    Cited by:

    1. Bachas, Pierre & Gadenne, Lucie & Jensen, Anders, 2020. "Informality, Consumption Taxes and Redistribution," The Warwick Economics Research Paper Series (TWERPS) 1277, University of Warwick, Department of Economics.
    2. Denis Cogneau & Yannick Dupraz & Justine Knebelmann & Sandrine Mesplé-Somps, 2021. "Taxation in Africa from Colonial Times to Present Evidence from former French colonies 1900-2018," PSE Working Papers halshs-03420664, HAL.
    3. Arun Advani, 2022. "Who does and doesn't pay taxes?," Fiscal Studies, John Wiley & Sons, vol. 43(1), pages 5-22, March.
    4. Mazhar Waseem & Mazhar Waseem, 2020. "Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax," CESifo Working Paper Series 8231, CESifo.
    5. Jonas Hjort & Vinayak Iyer & Golvine De Rochambeau, 2020. "Informational Barriers to Market Access: Experimental Evidence from Liberian Firms," Sciences Po publications 2020-09, Sciences Po.
    6. Mazhar Waseem, 2019. "Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax," Economics Discussion Paper Series 1913, Economics, The University of Manchester.
    7. repec:hal:wpspec:info:hdl:2441/6jahov5tde8vt9aplqrgg3trl4 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/6jahov5tde8vt9aplqrgg3trl4 is not listed on IDEAS

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