 Taxation and corruption: theory and firm-level evidence from UgandaBernard Gauthier () and Jonathan Goyette Applied Economics, 2014, vol. 46, issue 23, 2755-2765 Abstract: This article develops a simple framework to analyse the negotiation over bribe and tax payments during the tax collection process. We show that the larger the bribe a firm offers to a tax collector, the larger the tax rebate it gets. More particularly, we show that the negotiation over bribe and tax payments hinges on four other factors: firms' official liabilities, detection, firms' negotiation power and red tape costs imposed on firms. Some of the predictions from the theoretical model are tested using firm-level data from Uganda. We find that bribe and tax payments are inversely related, thereby supporting the hypothesis of a negotiation taking place between firms and tax collectors. In particular, a 1% point increase in average bribe payments per employee is associated with a 7% point reduction in average amount of tax payments per employee. Results are robust to various instruments dealing with the endogenous relationship between bribes and taxes. Date: 2014 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:46:y:2014:i:23:p:2755-2765 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2014.909580 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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