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on Informal and Underground Economics |
| By: | Ali Bayar (EcoMode CESifo); Barbara Bratta (Department of Finance Italian Ministry of Economy and Finance); Silvia Carta (Department of Finance Italian Ministry of Economy and Finance); Paolo Di Caro (Department of Law University of Catania Italy - Tax Administration Research Centre University of Essex Business School United Kingdom); Marco Manzo (Department of Finance Italian Ministry of Economy and Finance); Carlo Orecchia (Department of Finance Italian Ministry of Economy and Finance) |
| Abstract: | Reforming the structure of the Value Added Tax (VAT) is an open issue in different countries, mostly for raising revenues and improving the efficiency of the tax system. However, most of the existing analyses do not combine micro- and macro-modelling tools for assessing the welfare and redistributive effects of VAT reforms. Aspects like tax evasion and erosion, moreover, are usually of secondary importance when studying VAT changes. The objective of this paper is twofold. First, we propose an integrated approach, based on the new dynamic multi-sector, multi-household tax computable general equilibrium (CGE) model (ITAXCGE) recently developed at the Italian Ministry of Economy and Finance, to study a uniform VAT rate reform in Italy. Our empirical approach has the merit of including new information when evaluating VAT reforms: tax evasion and erosion, irregular labour, different household groups, and a detailed structure of taxation. Second, we simulate the effects of a uniform VAT rate reform on welfare and redistribution, by taking into consideration the consequences of such reform on VAT gap changes. Our results suggest that the equity-efficiency trade-off deriving from the reform under investigation is reduced when including information on tax evasion in the analysis. The policy implications of our study are finally discussed |
| Keywords: | Microsimulation, CGE-Modelling, integrated approach, VAT, tax gap. |
| JEL: | H31 D58 J22 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ahg:wpaper:wp2021-14&r= |
| By: | Hannes Fauser (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Sarah Godar (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper estimates income tax underreporting for the case of Germany, by income category and along the income distribution. Comparing weighted samples of survey and tax data, we find patterns that are in line with the literature: Average income from self-employment and from rent and lease in the survey is higher than in the tax data, increasing in upper quintiles. Income underreporting to the tax authorities may be one of several possible explanations for these descriptive findings. We therefore expand our analysis with the Pissarides & Weber (1989) approach that has been applied to a range of countries and data sources before. We use the German Socioeconomic Panel and the Taxpayer Panel, estimating food, housing cost and donation regressions. Results indicate that self-employment is associated with higher housing cost but not with higher food expenditure in the SOEP. In the TPP we find more robust indication of underreporting as self-employment and business incomes are significantly associated with higher donations and even more so for the top-income decile. We use our results to derive tentative estimates of aggregate tax revenue losses due to underreporting of self-employment and other non-wage incomes. |
| Keywords: | tax evasion, income misreporting, personal income tax, self-employment, distributional effects |
| JEL: | D12 D31 H24 H26 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_36&r= |
| By: | Piyaporn Sodsriwiboon; Mr. Adil Mohommad; Charlotte Sandoz |
| Abstract: | At the macro level, productivity is driven by technology and the efficiency of resource allocation, as outcomes of firms’ decision making. The relatively high level of resource misallocation in India’s formal manufacturing sector is well documented. We build on this research to further investigate the drivers of misallocation, exploiting micro-level variation across Indian states. We find that states with less rigid labor markets have lesser misallocation. We also examine the interaction of labor market rigidities with informality which is a key feature of India’s labor markets. Our results suggest that reducing labor market rigidities in states with high informality has a net positive effect on aggregate productivity. |
| Keywords: | Misallocation;India;Firm level;Structural reforms.;WP;price distortion;product market regulation;revenue TFP;balance sheet data;exit from informality;firm TFPR |
| Date: | 2021–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/051&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Valentine B. Soumtang (University of Yaoundé II, Cameroon); Ofeh M. Edoh (Yaoundé, Cameroon) |
| Abstract: | This study assesses financial determinants of informal financial sector development in 48 Sub-Saharan African countries for the period 1995-2017. Quantile regressions are used as the empirical strategy which enables the study to assess the determinants throughout the conditional distribution of informal sector development dynamics. The following financial determinants affect informal financial development and financial informalization differently in terms of magnitude and sign: bank overhead costs; net internet margin; bank concentration; return on equity; bank cost to income ratio; financial stability; loans from non-resident banks; offshore bank deposits and remittances. The determinants are presented from a plethora of perspectives, inter alia: U-Shape, S-Shape and positive or negative thresholds. The study not only provides a practical way by which to assess the incidence of financial determinants on informal financial sector development, but also provides financial instruments by which informal financial development can be curbed. |
| Keywords: | Informal finance; financial development; Africa |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/077&r= |