Under the Radar: The Effects of Monitoring Firms on Tax Compliance

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

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper analyzes the effects on tax compliance of monitoring the information trails generated by firms’ activities. We exploit quasi-experimental variation generated by a Large Taxpayers Unit (LTU) in Spain, which monitors firms with more than 6 million euros in reported revenue. Firms strategically bunch below this threshold in order to avoid stricter tax enforcement. This response is stronger in sectors where transactions leave more paper trail, implying that monitoring effort and the traceability of information reported by firms are complements. We calculate that there would be substantial welfare gains from extending stricter tax monitoring to smaller businesses.

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: 2015
New Economics Papers: this item is included in nep-eur, nep-iue, nep-law and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://warwick.ac.uk/fac/soc/economics/research/w ... erp_1070_almunia.pdf

Related works:
Journal Article: Under the Radar: The Effects of Monitoring Firms on Tax Compliance (2018)
Working Paper: Under the Radar: The Effects of Monitoring Firms on Tax Compliance (2015)
Working Paper: Under the Radar: The Effects of Monitoring Firms on Tax Compliance (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1070

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