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Measuring True Sales and Underreporting with Matched Firm-Level Survey and Tax Office Data

Author

Listed:
  • Fujin Zhou

    (VU University Amsterdam and Tinbergen Institute)

  • Remco Oostendorp

    (VU University Amsterdam, Tinbergen Institute, Amsterdam Institute for International Development, and Centre for the Study of African Economies Oxford University)

Abstract

This paper uses firm-level survey data matched with official tax records to estimate the unobserved true sales of formal firms in Mongolia. Taking into account firm-level incentives to comply with taxes and a production function technology linking unobserved true sales with observable firm-level production characteristics, we derive a multiple-indicators, multiple-causes model predicting true sales. We find that firms underreport sales to the tax office by 38.6%, but firm-level survey data also suffer from significant underreporting. Finally, we compare our approach with two alternative approaches of measuring underreporting and discuss the practical implications of the findings for firm-level analyses of underreporting. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Fujin Zhou & Remco Oostendorp, 2014. "Measuring True Sales and Underreporting with Matched Firm-Level Survey and Tax Office Data," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 563-576, July.
    • Handle: RePEc:tpr:restat:v:96:y:2014:i:3:p:563-576
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    Cited by:

    1. Kiyoyasu Tanaka & Souknilanh Keola, 2017. "Shedding Light on the Shadow Economy: A Nighttime Light Approach," Journal of Development Studies, Taylor & Francis Journals, vol. 53(1), pages 32-48, January.
    2. Badaoui, Eliane & Walsh, Frank, 2022. "Productivity, non-compliance and the minimum wage," Journal of Development Economics, Elsevier, vol. 155(C).
    3. Roberto Dell’Anno, 2023. "Correction to: Measuring the unobservable: estimating informal economy by a structural equation modeling approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 278-279, February.

    More about this item

    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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