Responses of firms to tax, administrative and accounting rules: Evidence from Armenia

Zareh Asatryan and Andreas Peichl

No 16-065, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Using panel data on the full population of corporate tax returns of Armenian firms, we study the behavioral response of firms to three size-dependent regulations. We find: i) a strong response to an accounting notch where International Financial Reporting Standards become mandatory; ii) a moderate response to an administrative notch below which the frequency of filing and paying taxes declines from monthly to quarterly; and iii) no response to a tax notch created by the registration threshold of the value added tax. Exploiting tax audits, we provide evidence suggesting that income under-reporting drives the bunching response of firms by between 60 and 100 percent. Additional evidence suggests that firms respond to tax audits by compensating every additional dollar of audit driven increase in reported income by a 0.7-0.8 dollar increase in reported deductions.

Keywords: small and medium enterprises; size-dependent regulation; value added tax; tax administration; tax accounting; tax evasion (search for similar items in EconPapers)
JEL-codes: H25 H26 O12 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-acc, nep-iue, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Responses of Firms to Tax, Administrative and Accounting Rules: Evidence from Armenia (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:16065

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