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Revealing Tax Evasion : Experimental Evidence from a Representative Survey of Indonesian Firms

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  • Hoy, Christopher Alexander
  • Jolevski, Filip
  • Obeyesekere, Anthony

Abstract

This paper examines the pervasiveness of tax evasion among firms in Indonesia and the characteristics associated with higher levels of noncompliance. Tax evasion is estimated through a randomized, double-list experiment embedded in a nationally representative survey of 2,955 registered firms. This revealed whether firms pay all the taxes they owe without them having to disclose this directly. Across both list experiments, around a quarter of the firms indirectly reveal that they have evaded taxes. Firms that do not export, face intense competition from informal firms, and believe tax administration is a major obstacle to their business are the most likely to evade taxes. These findings help to inform the enforcement activities of tax authorities in middle-income countries, which face substantial challenges in estimating levels of tax evasion and identifying noncompliant taxpayers.

Suggested Citation

  • Hoy, Christopher Alexander & Jolevski, Filip & Obeyesekere, Anthony, 2024. "Revealing Tax Evasion : Experimental Evidence from a Representative Survey of Indonesian Firms," Policy Research Working Paper Series 10857, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10857
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    References listed on IDEAS

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    1. Mazhar Waseem, 2022. "The Role of Withholding in the Self-Enforcement of a Value-Added Tax: Evidence from Pakistan," The Review of Economics and Statistics, MIT Press, vol. 104(2), pages 336-354, May.
    2. Ahlquist, John S., 2018. "List Experiment Design, Non-Strategic Respondent Error, and Item Count Technique Estimators," Political Analysis, Cambridge University Press, vol. 26(1), pages 34-53, January.
    3. Paul Carrillo & Dina Pomeranz & Monica Singhal, 2017. "Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 144-164, April.
    4. Karlan, Dean S. & Zinman, Jonathan, 2012. "List randomization for sensitive behavior: An application for measuring use of loan proceeds," Journal of Development Economics, Elsevier, vol. 98(1), pages 71-75.
    5. Waseem, Mazhar, 2023. "Overclaimed refunds, undeclared sales, and invoice mills: Nature and extent of noncompliance in a value-added tax," Journal of Public Economics, Elsevier, vol. 218(C).
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