Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement

Monica Singhal, Dina Pomeranz and Paul Carrillo

No 10603, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature argues that cross-checks of taxpayer reports against third-party information are critical for effective tax enforcement. However, such cross-checks may have limited effectiveness if taxpayers can make offsetting adjustments on other margins. We present a simple framework demonstrating conditions under which this occurs and empirical evidence from a natural experiment in Ecuador. When firms are notified about detected revenue discrepancies, they increase reported revenues - but also reported costs (by 96 cents per dollar of revenue adjustment), resulting in minor increases in tax collection.

Keywords: Ecuador; Evasion; Tax (search for similar items in EconPapers)
JEL-codes: H25 H26 O23 O38 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-iue, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement (2017)
Working Paper: Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement (2014)
Working Paper: Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement (2014)
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