Bribes vs. taxes: Market structure and incentives

Francesco Amodio, Jieun Choi, Giacomo De Giorgi and Aminur Rahman

Journal of Comparative Economics, 2022, vol. 50, issue 2, 435-453

Abstract: Firms in low-income countries often avoid paying taxes by making informal payments to tax officials. To decrease these payments, we design an incentive scheme for business tax inspectors that rewards them according to the anonymous evaluation submitted by inspected firms. We show theoretically that incentives decrease the bribe amount, but make firms facing a more inelastic demand more attractive for inspectors. Attaching higher weights to the evaluation of smaller firms limits the scope for targeting. We evaluate both schemes in a field experiment in the Kyrgyz Republic. Our intervention reduces average business costs and prices, and increases tax revenues.

Keywords: Taxation; Corruption; Market structure; Demand elasticity (search for similar items in EconPapers)
JEL-codes: D22 D40 H26 H71 O12 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Bribes vs. Taxes: Market Structure and Incentives (2018)
Working Paper: Bribes vs. Taxes: Market Structure and Incentives (2018)
Working Paper: Bribes vs. Taxes: Market Structure and Incentives (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:50:y:2022:i:2:p:435-453

DOI: 10.1016/j.jce.2021.09.006

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