The use of third-party information reporting for tax deductions: evidence and implications from charitable deductions in Denmark

Christian Gillitzer and Peer Skov

Oxford Economic Papers, 2018, vol. 70, issue 3, 892-916

Abstract: We show that the introduction of information reporting for charitable tax deductions in Denmark in 2008 was associated with a doubling in the number of deductions claimed, and a 15% rise in the total value of claims, which can be credibly attributed to previously unclaimed deductions. This contradicts the presumption that evasion is the main source of non-compliance for deductions, and that the use of information reporting raises revenue collections. A pre-reform randomized audit experiment did not detect the unclaimed deductions, implying audits overstate evasion relative to extensive-margin underreporting. Various tests suggest that compliance cost, passive choice and overwithholding suppressed self-reporting of deductions.

JEL-codes: D64 H24 H26 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (34)

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