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I evade taxes, and so what? A new database and evidence from Colombia

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  • Leopoldo Fergusson
  • Carlos Molina
  • Juan Felipe Riaño

Abstract

Tax evasion lies at the core of the relationship between citizens and the state: it reflects the level of trust in the state and compliance with society's implicit `social contract'. However, empirically analyzing it is challenging, with few direct and reliable measures. This has hampered the advancement of the theoretical and empirical literature, which is especially underdeveloped in the case of indirect tax evasion. We conduct list experiments on a large sample of households to estimate the incidence of value added tax (VAT) evasion, as well as the extent of social desirability bias in respondent answers. Around 20% of respondents engage in evasion and, surprisingly, they are not ashamed to recognize this openly. Evasion is more prevalent in places with more informality and less physical presence of the state, as well as among poorer, less educated individuals, and those who disregard the rule of law.

Suggested Citation

  • Leopoldo Fergusson & Carlos Molina & Juan Felipe Riaño, 2017. "I evade taxes, and so what? A new database and evidence from Colombia," Documentos CEDE 15444, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:015444
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    Cited by:

    1. Diana Ricciulli-Marín, 2020. "The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia," Cuadernos de Historia Económica 53, Banco de la Republica de Colombia.
    2. Burgstaller, Lilith & Feld, Lars P. & Pfeil, Katharina, 2022. "Working in the shadow: Survey techniques for measuring and explaining undeclared work," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 661-671.
    3. Leopoldo Fergusson & Carlos A. Molina & James A. Robinson, 2022. "The Weak State Trap," Economica, London School of Economics and Political Science, vol. 89(354), pages 293-331, April.
    4. Leopoldo Fergusson, 2019. "Who wants violence? The political economy of conflict and state building in Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(78), pages 671-700, November.
    5. Diana Ricciulli, 2020. "The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia," Documentos CEDE 18537, Universidad de los Andes, Facultad de Economía, CEDE.
    6. Leopoldo Fergusson & Carlos Molina & Juan Felipe Riaño, 2018. "I Sell My Vote, and So What? Incidence, Social Bias, and Correlates of Clientelism in Colombia," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2018), pages 181-218, November.
    7. Pedro A. Cabra-Acela, 2021. "Rewarding good taxpayers, an effective mechanism?," Documentos CEDE 19419, Universidad de los Andes, Facultad de Economía, CEDE.

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    More about this item

    Keywords

    Tax evasion; value added tax; social desirability bias; list experiments.;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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