Estimating tax noncompliance among the self-employed—evidence from pleasure boat registers

Per Engström (), Johannes Hagen () and Edvard Johansson ()
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Per Engström: Uppsala University
Johannes Hagen: Uppsala University
Edvard Johansson: Uppsala University

Small Business Economics, 2023, vol. 61, issue 4, No 15, 1747-1771

Abstract: Abstract We improve upon the Pissarides-Weber method for estimating tax evasion among the self-employed by utilizing unique register-based consumption measures from the Swedish and Finnish mandatory registers for pleasure boats. This allows for more detailed and statistically powered analyses than survey-based applications. Our results indicate overall levels of hidden incomes that are in line with previous studies. However, the functional form analysis shows that the estimated sizes of underreporting in absolute monetary amounts are almost constant over reported income levels, whereas previous studies have assumed that the underreporting is proportional to income. The results from the preference analysis—in which we compare households that will become self-employed in the near future with households that will remain wage earners—are mixed; the two types of households have insignificant (Finland) or economically small (Sweden) preference differences. However, when we use engine power as a price proxy, the preference differences are larger in both countries.

Keywords: Tax noncompliance; Income underreporting; Self-employment; Pleasure boats; Register data; Engel curve (search for similar items in EconPapers)
JEL-codes: D12 H24 H25 H26 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11187-023-00749-3

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