Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax

Mazhar Waseem and Mazhar Waseem
Authors registered in the RePEc Author Service: Mazhar Waseem

No 8231, CESifo Working Paper Series from CESifo

Abstract: I leverage a Pakistani tax reform that cuts the tax rate on the supply chains of five major industries of the country from 15% to 0% to cast light on the extent of, and mechanisms driving, VAT noncompliance in a representative emerging economy. I find that firms overclaim refunds by 22% and underreport domestic B2C sales by 43.5%. Together, this implies an evasion rate of 77% in the treated industries and 38% in the population. I explore the role of three mechanisms (1) the destination principle, (2) the last-mile problem, and (3) invoice mills in driving this noncompliance.

Keywords: VAT; tax evasion; firm behavior (search for similar items in EconPapers)
JEL-codes: H25 H26 H32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-gen, nep-iue, nep-ore and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Overclaimed refunds, undeclared sales, and invoice mills: Nature and extent of noncompliance in a value-added tax (2023)
Working Paper: Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax (2020)
Working Paper: Overclaimed Refunds, Undeclared Sales, and Invoice Mills: Nature and Extent of Noncompliance in a Value-Added Tax (2019)
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