Firms as tax collectors

Pablo Garriga and Dario Tortarolo

Journal of Public Economics, 2024, vol. 233, issue C

Abstract: We show that delegating tax collection duties to large firms can bolster tax capacity in weak-enforcement settings. We exploit two reforms in Argentina that dramatically expanded and subsequently reduced turnover tax withholding by firms. Combining firm-to-firm data with regression discontinuity and difference-in-differences methods centered on revenue eligibility thresholds, we find that: (i) appointing large firms as collection agents (CAs) does not hinder their economic activity, (ii) it leads to a significant increase in self-reported sales and tax payments among CAs’ business partners, (iii) these effects are primarily concentrated among downstream firms that lack a traceable paper trail, and (iv) reductions in withholding lead to a decrease in self-reported sales, albeit to a lesser extent. Tax-collecting firms can thus help boost tax compliance and revenue.

Keywords: Tax collection; Turnover tax; Tax compliance; Withholding (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Working Paper: Firms as tax collectors (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:233:y:2024:i:c:s0047272724000288

DOI: 10.1016/j.jpubeco.2024.105092

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