No state can exist in the long term without effective taxation. To be able to execute its various roles, the state needs to acquire the capacity to enforce compliance with tax obligations. In developing countries, this task is far from obvious. Taxation is particularly challenging in less formalized economies, since it is difficult for the government to gain information about what taxable transactions actually occurred. One important source of information that governments rely on are paper trails by third parties, which document such transactions. This talk presents evidence from Chile and Ecuador on the power and limitations of such paper trails. It also discusses the challenges that can emerge as countries introduce the use of third-party reported information for tax enforcement. The evidence suggests that despite the (helpful) growth of computer-based monitoring using cross-checks of third-party information, strengthening the traditional enforcement capacity of developing country governments still remains crucial for effective tax collection.
The Development Economics Vice Presidency (DEC) launched its lecture series in April 2005 to bring distinguished academics to the Bank to present and discuss new knowledge on development. The purpose of the Lecture Series is to introduce ideas on
Please visit DEC Lecture Series to access additional information about this event series as well as presentation materials from past talks.