Heterogeneous Responses to Effective Tax Enforcement: Evidence from Spanish Firms

Miguel Almunia and David Lopez-Rodriguez ()
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David Lopez-Rodriguez: Banco de España

No 1412, Working Papers from Oxford University Centre for Business Taxation

Abstract: We investigate whether monitoring the information trails generated by firms’ activities improves tax compliance. We exploit quasi-experimental variation generated by a Large Taxpayers’ Unit (LTU) in Spain, which devotes additional resources to verifying the transactions reported by firms with more than €6 million in reported revenue. Firms bunch below this threshold in order to avoid stricter tax enforcement, and this reaction is stronger in sectors where paper trail is easier to monitor. These results suggest that monitoring efforts by the tax authority and the traceability of information reported by firms are complements, and both are necessary for effective tax enforcement.

Keywords: tax enforcement; firms; bunching; Spain; Large Taxpayers Unit (LTU). (search for similar items in EconPapers)
JEL-codes: H26 H32 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-eur, nep-iue, nep-law, nep-mfd and nep-pbe
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Citations: View citations in EconPapers (21)

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Working Paper: Heterogeneous responses to effective tax enforcement: evidence from Spanish firms (2014)
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