The incidence of VAT evasion

Zareh Asatryan and David Gomtsyan

No 20-027, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Who benefits from the evasion of value added taxes (VAT)? Using a reform that enforced VAT on previously non-compliant large retailers in Armenia, we estimate a onethird passthrough of the tax burden on prices. This suggests that pre-enforcement evasion rents were broadly shared with consumers through lower prices. Our theoretical and empirical results explain this low passthrough rate by the supply-chain effects and second-order compliance responses of firms to VAT enforcement. Our distributional analysis shows that households at the bottom of the income distribution benefit more from the rents of evasion.

Keywords: Value added tax; Incidence; Evasion; Enforcement; Distributional Effects (search for similar items in EconPapers)
JEL-codes: D11 H22 H26 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: The Incidence of VAT Evasion (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20027

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