Evaluation of firms' dissimulated activity based on fiscal audits and integration in national accounts

C. Louvot-Runavot
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C. Louvot-Runavot: Insee

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: The measurement of the hidden economy is necessary to ensure exhaustiveness of Gross Domestic Product and thus be able to conduct comparisons between countries. The part of firms activity that is not declared to tax authorities inevitably evades statistical observation. In France, it is possible to evaluate this hidden activity by means of fiscal audits, during which concealed profits may be unveiled. By incorporating a fiscal audit sample into a survey, this type of fraud can then be extrapolated to the whole field. For every category of taxpayer, inclusion probabilities have been estimated with logistic models, making use of categorical predictor variables, like size or activity sector. The more significant of those variables have been used next to define a post-stratification upon which is based the macroeconomic evaluation of the dissimulated aggregates. This extrapolation method takes into account the overrepresentation of the firms that are supposed to conceal the biggest amounts of taxes. In particular, financial indicators have been introduced in the stratification to improve the modeling of this overrepresentation and they lead to a marked decrease in the estimation of the hidden production. The aim was to rectify National Accounts output and value-added. Among the fiscal rectifications, only those that dealt with the real flows of the firms book-keeping were taken into account. Moreover, when the available rectifications were concerned with taxes, it was necessary to go back to the corresponding taxable amount. This procedure is the main weakness of the fiscal information processing. Applied to 2006 turnover, the fraud rates finally obtained led to a 40 billion euro rise in the level of national value-added, that is to say a 2.2 % adjustment of GDP.

Keywords: Dissimulated activity; fiscal audit; logistic regression; post-stratification; correction (rectification); National Accounts (search for similar items in EconPapers)
JEL-codes: C25 C81 E01 E26 (search for similar items in EconPapers)
Date: 2011
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