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Tax Professionals: Tax-Evasion Facilitators or Information Hubs?

Marco Battaglini (), Luigi Guiso (), Chiara Lacava and Eleonora Patacchini

No 13656, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for tax evasion; and informational externalities generated by the tax professional activities. We provide evidence supporting the simultaneous presence of both mechanisms.

Keywords: tax enforcement; tax evasion (search for similar items in EconPapers)
JEL-codes: H26 K34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-eur, nep-iue, nep-law, nep-pbe and nep-pub
Date: 2019-04
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