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Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru

Author

Listed:
  • Mr. Matthieu Bellon
  • Jillie Chang
  • Ms. Era Dabla-Norris
  • Salma Khalid
  • Frederico Lima
  • Enrique Rojas
  • Pilar Villena

Abstract

This paper examines the impact of e-invoicing on firm tax compliance and performance using administrative tax data and quasi-experimental variation in the rollout of VAT electronic invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value-added by over 5 percent in the first year after adoption. The impact is concentrated among smaller firms and sectors with higher rates of non-compliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform’s positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue mobilization.

Suggested Citation

  • Mr. Matthieu Bellon & Jillie Chang & Ms. Era Dabla-Norris & Salma Khalid & Frederico Lima & Enrique Rojas & Pilar Villena, 2019. "Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru," IMF Working Papers 2019/231, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/231
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    References listed on IDEAS

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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