Tax Avoidance or Compliance Costs Avoidance? Evidence from VAT Reforms in Japan

Takafumi Kawakubo, Takafumi Suzuki and Kohei Asao
Additional contact information
Takafumi Kawakubo: London School of Economics and Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan
Takafumi Suzuki: Lecturer, Aichi Shukutoku University
Kohei Asao: Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: This paper disentangles the motivations behind how enterprises respond to sizedependent tax regulations by exploiting the value-added tax (VAT) reforms in Japan. In Japan, both tax threshold and tax rate have been changed over the past three decades since the introduction of VAT. We build on the model of Harju et al. (2019) to incorporate various tax reforms and derive empirically testable implications. By using a novel panel of Japanese Census of Manufacture covering the period over VAT introduction and reforms, we conducted bunching estimation. The local estimates imply that the observed output response by enterprises is mainly caused by compliance costs rather than tax rates for small enterprises in Japan. The results suggest that easing compliance costs could be more effective support for small enterprises rather than reducing tax rate/burden.

Keywords: compliance costs; value-added tax; sole proprietor; firm behavior (search for similar items in EconPapers)
JEL-codes: D22 H25 H32 L11 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022-06
New Economics Papers: this item is included in nep-acc, nep-iue and nep-pbe
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mof.go.jp/pri/research/discussion_paper/ron346.pdf First version, 2016 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mof:wpaper:ron346

Access Statistics for this paper

More papers in Discussion papers from Policy Research Institute, Ministry of Finance Japan Contact information at EDIRC.
Bibliographic data for series maintained by Policy Research Institute ().