Compulsory staff registers as a way of increasing firms’ wage reporting: A revenue-cost analysis

Sven-Olov Daunfeldt, Anton Gidehag and Niklas Rudholm
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Anton Gidehag: Institute of Retail Economics (Handelns Forskningsinstitut), Postal: Handelns Forskningsinstitut, Regeringsgatan 60, 103 29 Stockholm, Sweden and Örebro University, Örebro, Sweden
Niklas Rudholm: Institute of Retail Economics (Handelns Forskningsinstitut), Postal: Handelns Forskningsinstitut, Regeringsgatan 60, 103 29 Stockholm, Sweden

No 6, HFI Working Papers from Institute of Retail Economics (Handelns Forskningsinstitut)

Abstract: In 2007, the Swedish government tried to prevent firms from underreporting their wage payments by implementing a reform that required restaurants and hairdressers to have staff registers. Employers were required to provide detailed information on when their employees were working, and the Swedish Tax Authority was also given a mandate to carry out unannounced control visits and to impose fines on firms that had not properly filled out their staff registers. We estimate the effect of this reform on firms’ wage reporting using propensity score matching combined with a difference-in-differences analysis. Then, we compare the increase in tax revenues with the costs that the staff register system generated for the firms and the Swedish Tax Authority. Our results show that the total costs of the system exceeded the increase in tax revenues by approximately 355 million SEK ($36.6 million) over a four-year period, even when utilizing point estimates that are likely to overstate the effect on wage reporting. We thus conclude that considering the costs associated with the reform, the staff register reform is not economically justified.

Keywords: tax evasion; firm regulation; quasi-experimental method; unreported wages; propensity score matching (search for similar items in EconPapers)
JEL-codes: H26 H32 K34 L51 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2019-12-20
New Economics Papers: this item is included in nep-iue and nep-law
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