Tax Simplicity or Simplicity of Evasion? Evidence from Self-Employment Taxes in France

Philippe Aghion, Maxime Gravoueille, Matthieu Lequien and Stefanie Stantcheva

No 19039, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A common complaint about tax systems is that they are too complex and several countries offer simplified regimes to subsets of taxpayers. But do such regimes simplify tax reporting or just make it easier to evade taxes? We use panel data on the universe of income tax returns in France and the introduction of simplified tax regimes for the self-employed to assess whether individuals' shift towards these simpler tax regimes--among others, captured by substantial bunching below the eligibility thresholds--is driven by the desire for simplicity or by motives related to tax evasion. Tax evasion plays a significant role in explaining individuals' attraction to simpler tax regimes. We develop a structural model to quantitatively assess the importance of simplicity and evasion motives. Our preferred estimates indicate a significant preference for tax simplicity, increasing in the degree of simplicity, ranging from 162 to 942 euros per year per self-employed individual, along with a sizable evasion elasticity.

Keywords: Taxation; Evasion; Complexity; Bunching (search for similar items in EconPapers)
JEL-codes: H21 H24 H26 (search for similar items in EconPapers)
Date: 2024-05
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Related works:
Working Paper: Tax simplicity or simplicity of evasion? Evidence from self-employment taxes in France (2024)
Working Paper: Tax simplicity or simplicity of evasion? Evidence from self-employment taxes in France (2023)
Working Paper: Tax Simplicity or Simplicity of Evasion? Evidence from Self-Employment Taxes in France (2017)
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