Events
Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement
September 30, 2015Poverty and Applied Microeconomics Seminar Series

Speaker: Dina Pomeranz is an Assistant Professor of Business Administration at Harvard Business School. More »

Abstract: Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature has argued that the ability to verify taxpayer self-reports against reports from third parties is critical for modern tax enforcement and the growth of state capacity. However, there may be limits to the effectiveness of third-party information if taxpayers can make offsetting adjustments on less verifiable margins. We present a simple framework to demonstrate the conditions under which this will occur and provide strong empirical evidence for such behavior by exploiting a natural experiment in Ecuador. We find that when firms are notified by the tax authority about detected revenue discrepancies on previously filed corporate income tax returns, they increase reported revenues, matching the third-party estimate when provided. Firms also increase reported costs by 96 cents for every dollar of revenue adjustment, resulting in minor increases in total tax collection.

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Last Updated: Sep 25, 2015

The Poverty and Applied Micro Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers in applied microeconomics from the fields of poverty, human development and public service delivery, agriculture and rural development, political economy, behavioral economics, private sector development, and a range of other fields to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Event Details
  • Date: September 30, 2015
  • Location: MC 5-100
  • Time: 12:30 - 2:00 PM
  • CONTACT: Anna Bonfield
  • abonfield@worldbank.org



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