Enhancing Tax Compliance in the Dominican Republic Through Risk-based VAT Invoice Management

Cristian Alonso, Ledys Feliz, Patricia Gil and Miguel Pecho

No 2021/231, IMF Working Papers from International Monetary Fund

Abstract: Invoices document economic transactions and are thus critical to assess tax liabilities. We study a reform in the Dominican Republic that aimed to integrate invoice management into a broader, more comprehensive, risk-based compliance strategy. By rationing authorized invoices based on an extra scrutiny of each taxpayer’s compliance history, the reform led to significant and persistent improvements on filing, payment, and information reporting obligations and a modest increase in reported tax liabilities. Our study shows that deterrence effects over compliance behaviors are strengthened when the tax administration makes explicit and active use of taxpayers’ information, no matter if the invoicing framework is paper-based or electronic.

Keywords: invoice management; filing obligation; compliance history; authorized invoice; compliance strategy; Value-added tax; Income and capital gains taxes; Tax administration core functions; Tax arrears management; Small and medium enterprises; Caribbean (search for similar items in EconPapers)
Pages: 32
Date: 2021-09-10
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