Tax, Lies and Red Tape

Megha Patnaik

No 22123, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Do family firms evade tax when enforcement is weak? I combine a measure of ultimate ownership in India with firm-level excise tax payments and statutory rates. Firms with greater family shareholding have lower effective tax rates. To identify differences in compliance, I use year-by-year changes in statutory rates across products. A one-percentage-point increase in the statutory rate for a firm raises the effective rate by 0.14 points for family firms versus 0.20 for other firms. When states introduce e-filing for VAT, the effective rate of family firms rises by 0.82 percentage points relative to other firms, closing half the gap.

Keywords: Family firms; Tax evasion; Ownership concentration; State capacity; India (search for similar items in EconPapers)
JEL-codes: G32 H26 O17 (search for similar items in EconPapers)
Date: 2026-11
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