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Targeting in tax behavior: Evidence from Rwandan firms

Gabriel Tourek

Journal of Development Economics, 2022, vol. 158, issue C

Abstract: This paper describes tax behavior among firms in a low-income country that diverges from traditional models of compliance. Using the universe of administrative filings in Rwanda, I find that many firms consistently pay identical amounts in income tax year after year. Evidence from a survey of filers, matched to administrative filings, suggests that constraints on documenting and verifying earnings motivates a heuristic of targeting past payment amounts. To illustrate the policy relevance of this behavior, I exploit an income tax reform to show that targeting can reconcile perverse responses to tax changes: when taxes are cut, firms relying on this heuristic on average persist in paying as much as they did before.

Keywords: Economic history; Trade empirical; Firms; Policy reforms; Africa - macro (search for similar items in EconPapers)
JEL-codes: D90 H25 O17 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jdeveco.2022.102911

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