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Tax Professionals:Tax-Evasion Facilitators or Information Hubs?

Marco Battaglini (), Luigi Guiso (), Chiara Lacava and Eleonora Patacchini
Additional contact information
Chiara Lacava: Goethe University and SAFE
Eleonora Patacchini: Cornell University and EIEF

No 1904, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

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.

New Economics Papers: this item is included in nep-pbe
Date: 2019, Revised 2019-04
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Working Paper: Tax Professionals: Tax-Evasion Facilitators or Information Hubs? (2019) Downloads
Working Paper: Tax Professionals: Tax-Evasion Facilitators or Information Hubs? (2019) Downloads
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