Tax Complexity and Firm Tax Evasion: A Cross-Country Investigation

Prianto Budi Saptono (), Gustofan Mahmud, Fauzilah Salleh, Intan Pratiwi, Dwi Purwanto and Ismail Khozen
Additional contact information
Prianto Budi Saptono: Department of Fiscal Administration, Universitas Indonesia, Depok 16424, Indonesia
Gustofan Mahmud: Accounting Department, Swadaya Institute of Communication and Business, Jakarta 13620, Indonesia
Fauzilah Salleh: Faculty of Business and Management, Universiti Sultan Zainal Abidin, Kuala Terengganu 21300, Malaysia
Intan Pratiwi: Tax Research Department, Pratama Institute for Fiscal Policy and Governance Studies, Jakarta 12530, Indonesia
Dwi Purwanto: Tax Research Department, Pratama Institute for Fiscal Policy and Governance Studies, Jakarta 12530, Indonesia
Ismail Khozen: Tax Research Department, Pratama Institute for Fiscal Policy and Governance Studies, Jakarta 12530, Indonesia

Economies, 2024, vol. 12, issue 5, 1-36

Abstract: This paper endeavours to investigate whether a complex tax system influences firms’ propensity toward tax evasion across countries. To achieve the objectives of this study, we utilised the World Bank Enterprise Survey and the World Bank’s Doing Business databases covering more than 46,000 companies from 83 countries. Our study revealed that the increased time required to pay taxes and higher total tax payments were associated with a greater extent and incidence of tax evasion among firms. The consistency of these benchmark regression results was proven through endogeneity analysis and several robustness tests. Furthermore, our heterogeneity analyses showed that the effect of tax complexity on firm tax evasion was more prominent in low- and lower-middle-income countries and also in the primary industry. These findings offer promising evidence for policymakers, particularly in low- and lower-middle-income countries where the majority of companies operate in the primary industry. Addressing the complexity of the tax system could potentially mitigate the adverse impact on tax evasion levels in these countries. Furthermore, our spatial analysis provides valuable insights, emphasising the potential impact of tax complexity in neighbouring countries and underscoring the necessity for policymakers in the home countries to strategise on harmonising and streamlining their tax systems.

Keywords: tax complexity; firm tax evasion; firm-level data; cross-country dimension (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-7099/12/5/97/pdf (application/pdf)
https://www.mdpi.com/2227-7099/12/5/97/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:12:y:2024:i:5:p:97-:d:1381828

Access Statistics for this article

Economies is currently edited by Ms. Adore Zhou

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().