Ghosting the Tax Authority: Fake Firms and Tax Fraud in Ecuador

Paul Carrillo, Dave Donaldson, Dina Pomeranz and Monica Singhal

American Economic Review: Insights, 2023, vol. 5, issue 4, 427-44

Abstract: An important but poorly understood form of firm tax evasion arises from "ghost firms"—fake firms that issue fraudulent receipts so that their clients can claim false deductions. We provide a unique window into this global phenomenon using transaction-level tax data from Ecuador. Five percent of firms use ghost invoices annually. Among these firms, ghost transactions comprise 14 percent of purchases. Ghost transactions are prevalent among large firms and firms with high-income owners and exhibit suspicious patterns, such as bunching below financial system thresholds. An innovative enforcement intervention targeting ghost clients rather than ghosts themselves led to substantial tax recovery.

JEL-codes: D22 H25 H26 K34 L25 O14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/aeri.20220321

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