|
on Informal and Underground Economics |
| By: | Dix-Carneiro, Rafael (Duke University); Goldberg, Pinelopi Koujianou (Yale University); Meghir, Costas (Yale University); Ulyssea, Gabriel (University College London) |
| Abstract: | We build an equilibrium model of a small open economy with labor market frictions and imperfectly enforced regulations. Heterogeneous firms sort into the formal or informal sector. We estimate the model using data from Brazil, and use counterfactual simulations to understand how trade affects economic outcomes in the presence of informality. We show that: (1) Trade openness unambiguously decreases informality in the tradable sector, but has ambiguous effects on aggregate informality. (2) The productivity gains from trade are understated when the informal sector is omitted. (3) Trade openness results in large welfare gains even when informality is repressed. (4) Repressing informality increases productivity, but at the expense of employment and welfare. (5) The effects of trade on wage inequality are reversed when the informal sector is incorporated in the analysis. (6) The informal sector works as an "unemployment," but not a "welfare buffer" in the event of negative economic shocks. |
| Keywords: | regulations, trade, informality, labor market frictions |
| JEL: | F14 F16 J46 O17 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14060&r=all |
| By: | Yusuf Emre Akgunduz; Yusuf Kenan Bagir; Seyit Mumin Cilasun; Murat Gunay Kirdar |
| Abstract: | This study combines an administrative dataset of the full population of Turkish firms and the setting of the sudden mass migration of Syrian refugees to Turkey to identify the effect of migrants on firm performance and market structure. As a result of the migrant shock, existing firms expand and new firms are established. Quantitatively, a 10 percentage-point rise in migrant-to-native ratio increases average firm sales by 4% and the number of registered firms by 5%. While the number of firms rises, new firms are more likely to be small. The resulting market structure shows less concentration and firms reduce the share of workers formally employed. We further document an increased propensity to export and an increase in the variety of exported products. The impact on exports is driven by a rise in competitiveness of firms in regions hosting Syrians as a decline in export prices is observed. We also uncover evidence for an effect of migrants’ skills and networks on exports, as the export value and variety of products to the Middle East and North Africa (MENA) region increase more than those to the EU region among exporters while the prices of products exported to the two regions show similar changes. |
| Keywords: | Refugees, Firm performance, Market structure, Sales, Informality, Exports, Migrant business networks |
| JEL: | J15 J61 F16 L11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2101&r=all |
| By: | Sebastian Beer; Matthias Kasper; Erich Kirchler; Brian Erard |
| Abstract: | This paper employs unique tax administrative data and operational audit information from a sample of approximately 7,500 self-employed U.S. taxpayers to investigate the effects of operational tax audits on future reporting behavior. Our estimates indicate that audits can have substantial deterrent or counter-deterrent effects. Among those taxpayers who receive an additional tax assessment, reported taxable income is estimated to be 64% higher in the first year after the audit than it would have been in the absence of the audit. In contrast, among those taxpayers who do not receive an additional tax assessment, reported taxable income is estimated to be approximately 15% lower the year after the audit than it would have been had the audit not taken place. Our results suggest that improved targeting of audits towards noncompliant taxpayers would not only yield more direct audit revenue, it would also pay dividends in terms of future tax collections. |
| Keywords: | Auditing;Personal income;Tax assessments;Tax auditing and verification;Tax return filing compliance;WP,audit outcome,audited taxpayer |
| Date: | 2019–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/223&r=all |
| By: | Ho Fai Chan; Uwe Dulleck; Jonas Fooken; Naomi Moy; Benno Torgler |
| Abstract: | Increasing the tax compliance of self-employed business owners (particularly of trade- specific service providers) remains an ongoing challenge for tax authorities. From a compliance point of view, cash transactions are particularly problematic when services are paid for on the spot, as such exchanges are difficult to audit. As a novelty we present experimental evidence testing 11 different policy strategies in a setting that allows for cash transactions. Our sample includes both students and non-students active in service industries characterised by the opportunity to engage in cash transactions. While our results offer a positive outlook for the interventions reporting a significant effect, they particularly speak to the potential of moral suasion to increase compliance, as it may be implemented at relatively low cost. However, a carrot (offering support in tax declarations) as well as a stick (increasing the threat of audits) approach may be promising for increased compliance, especially where there is an evasion opportunity in cash-for-service payments between small businesses and individual customers who may share a common benefit from tax evasion. A stick approach is particularly efficient for those inclined to use cash transactions. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2021-01&r=all |
| By: | Marcelo L. Bergolo; Martin Leites; Ricardo Perez-Truglia; Matias Strehl |
| Abstract: | Why do some individuals choose to evade taxes while others do not? One popular view is that some individuals cheat on their taxes because they are more dishonest, selfish, or perceive different social norms. There is, however, little direct evidence on this matter. In collaboration with the national tax agency in Uruguay, we address this question using a combination of surveys and administrative records. Leveraging a unique institutional setting, we measure individual-level evasion choices. We document significant variation in evasion decisions across individuals. For a subsample of 6,078 taxpayers, we use survey questions and incentivized laboratory games to measure traits such as honesty, selfishness, and perceived social norms. We find that these individual traits have some power to predict who evades taxes, but other factors, such as the environment, play a much bigger role. |
| JEL: | H24 H26 K42 Z1 Z13 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28235&r=all |
| By: | LAHLOU, Kamal (Bank Al-Maghrib, Département de la Recherche); DOGHMI, Hicham (Bank Al-Maghrib, Département de la Recherche); SCHNEIDER, Friedrich (Johannes Kepler University of Linz) |
| Abstract: | The objective of this paper is to estimate the size of the shadow economy in Morocco over the period 1988-2018. The CDA and MIMIC approaches are used while taking into consideration variables that reflect the features of the Moroccan economy such as the importance of currency in circulation, the size of the agricultural sector and the financial development process. Our results show that the evolution of the shadow economy exhibits three distinct periods: (i) over the first period 1988-1998, it is almost stagnant at around 40% of GDP; (ii) during the second period 1999-2008, it decreases to 32% -34% of GDP; (iii) during the last period 2009-2018, the declining trend is continuing but at a more moderate pace, to reach a level just below 30% of GDP. These results suggest that the strategies implemented by national authorities since the early 2000s to improve the institutional, economic and financial environment contributed to reducing the size of the shadow economy. However, the persistence of important shadow activities requires additional structural reforms particularly those related to education, judiciary system, tax policy and labor market. |
| Keywords: | Shadow economy; MIMIC model; currency demand approach; financial development; structural reforms; Morocco |
| JEL: | C22 E26 H26 K42 O17 P11 |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:bkamdt:2020_003&r=all |
| By: | Matthieu Bellon; Jillie Chang; Era Dabla-Norris; Salma Khalid; Frederico Lima; Enrique Rojas; Pilar Villena |
| Abstract: | This paper examines the impact of e-invoicing on firm tax compliance and performance using administrative tax data and quasi-experimental variation in the rollout of VAT electronic invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value-added by over 5 percent in the first year after adoption. The impact is concentrated among smaller firms and sectors with higher rates of non-compliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform’s positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue mobilization. |
| Keywords: | Value-added tax;Credit;Tax administration core functions;Tax return filing compliance;Stocks;WP,firm,VAT,authority |
| Date: | 2019–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/231&r=all |
| By: | International Monetary Fund |
| Abstract: | This report presents the results of applying the Revenue Administration Gap Analysis Program (RA-GAP) value-added tax (VAT) gap estimation methodology1 to Poland for the period 2010–16. The RA-GAP methodology employs a top-down approach for estimating the potential VAT base, using statistical data from national accounts on value-added generated in each sector. There are two main components to this methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. RA-GAP provides estimates of the two components of the tax gap: the compliance gap and the policy gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. The policy gap is the difference between the overall tax gap and the compliance gap. To put the level and trends of the compliance gap into context it is also necessary to analyze the level and trends of the overall tax gap and the policy gap. |
| Keywords: | Tax gap;Value-added tax;Revenue Administration Gap Analysis Program (RA-GAP);Revenue administration;Tax efficiency;ISCR,CR,VAT,gap,compliance gap,VAT gap,revenue,yield |
| Date: | 2018–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2018/357&r=all |
| By: | Chakraborty, Tanika (Indian Institute of Management); Pandey, Manish (University of Winnipeg, Manitoba) |
| Abstract: | We use panel data for rural Kyrgyzstan to examine households' international migration response when faced with shocks. Using a household fixed effects regression model, we find that while a drought shock increases the likelihood of migration, winter and earthquake shocks reduce the likelihood of migration. We use a simple theoretical framework to illustrate the trade-off between two effects of a shock for a household: loss of income and increase in the need of labor services. We show that migration increases when the former effect of a shock dominates, it reduces when the latter effect dominates. We explore these mechanisms by examining how the migration-response to shocks changes in the presence of alternate coping mechanisms and by evaluating the effect of shocks on a household's decision to send and recall a migrant member. We find that when households have easier access to informal finance the migration-response is muted only for shocks for which the adverse income effect dominates. Our findings also suggest that while shocks for which the loss of income effect dominates have a greater effect on the decision to send a migrant, shocks for which the need of labor services effect dominates only affect the decision to recall a migrant. These findings provide evidence in favor of the proposed mechanisms through which shocks affect temporary migration. |
| Keywords: | temporary migration, shocks, insurance, informal finance, Asia, Kyrgyzstan |
| JEL: | J61 O15 O16 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14051&r=all |