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Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States

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  • Jason M. DeBacker
  • Bradley T. Heim
  • Anh Tran

Abstract

This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement.

Suggested Citation

  • Jason M. DeBacker & Bradley T. Heim & Anh Tran, 2012. "Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States," NBER Working Papers 17770, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17770
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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