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on Informal and Underground Economics |
| By: | Hjalte Fejerskov Boas (University of Copenhagen); Mona Barake (Skatteforsk, NMBU) |
| Abstract: | Cryptocurrencies pose substantial challenges to tax enforcement due to their anonymous and decentralized properties, undermining conventional regulatory practices. We study the impact of an ambitious new enforcement initiative aimed at addressing these challenges: domestic third-party reporting of crypto income. We estimate tax compliance and behavioral responses to this new policy by combining unique Danish microdata from domestic crypto platforms, administrative tax records, and cross-border bank transfers. Despite the introduction of domestic third-party reporting, over 90% of crypto investors do not declare crypto income. Moreover, we identify a significant and persistent evasion response to the policy as investors shift trading activity from domestic platforms, subject to third-party reporting, to foreign platforms outside regulatory reach. Our findings underscore the limits of domestic enforcement strategies in addressing tax evasion for decentralized, borderless assets like cryptocurrencies, highlighting the need for international coordination. |
| Keywords: | Cryptocurrencies, Tax compliance, Tax enforcement |
| JEL: | D31 H24 H26 H31 G5 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:029 |
| By: | Jeanne Bomare (Centre for the Analysis of Taxation, London School of Economics); Matthew Collin (EU Tax Observatory (Paris School of Economics) and NMBU) |
| Abstract: | Over the past decade, more than 100 jurisdictions have signed automatic exchange of financial information agreements (AEoI) in an effort to fight cross-border tax evasion. This paper studies the effectiveness and coverage of these agreements using account data leaked from an Isle of Man bank with a large customer base in countries participating to AEoI. We establish three sets of results. First, we find that the design of the governing AEoI agreement absolved the bank from reviewing and reporting a very large share (81%) of all the wealth owned by tax residents of AEoI participating countries, and instead the responsibility passed to smaller entities with weaker incentives to comply. Second, out of the wealth that fell under the bank’s reporting responsibility, foreign tax authorities only received reports covering 50% of what their tax residents held at the bank. We estimate that a further 32% went unreported due to loopholes in rule design. The rest of the accounts did not appear to have been reported, although through the information available in the leak we classified them as reportable. Third, we find evidence that bank clients who were more at risk of being reported on preemptively closed their accounts, potentially circumventing the AEoI reporting process. This paper provides new evidence on the potential limits of these agreements and how sophisticated individuals can ultimately avoid the AEoI transparency shock. |
| Keywords: | Tax Evasion, Information Exchange, Tax Enforcement |
| JEL: | H26 G21 F42 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:033 |
| By: | Leonard Le Roux |
| Abstract: | This paper studies the emergence of violence in legal markets, with a particular focus on the informal public transport sector in South Africa, where minibus taxis are integral to urban mobility. Despite being a legal sector, the taxi industry is plagued by significant and persistent violence, imposing substantial social costs. Using novel administrative data from the government's operating licence system, route-level pricing information, and a unique dataset of taxi-related violence compiled from print and online media, I examine the interplay between competition, firm growth, and violence. |
| Keywords: | Informality, Transportation, Violence, South Africa |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-45 |
| By: | Giuliana Pardelli; Julieta Peveri |
| Abstract: | Understanding how to tackle clientelism is crucial for enhancing political accountability. While its negative impacts on governance are well-documented, less is known about strategies to disrupt these networks. This paper argues that stricter enforcement of labor regulations can weaken clientelistic practices. Using an instrumental variable approach based on within-municipality changes in proximity to labor offices and state-level variations in labor inspectors in Brazil, we find that enhanced enforcement significantly reduces the electoral success of clientelistic parties and curtails patronage and vote-buying. These outcomes are largely driven by a decline in informal workers, who are more likely to support clientelistic parties. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:not:notnic:2025-05 |
| By: | Hjalte Fejerskov Boas; Matthew Collin; Sarah Godar; Carolina Moura; Andreas Økland |
| Abstract: | The introduction of the automatic exchange of bank information under the Common Reporting Standard (CRS) marked a breakthrough in the fight against global financial secrecy. In this report, we evaluate the scope and coverage of the CRS—in a context marked by limited evidence, primarily due to restricted access to CRS data. For this purpose, we have compiled newly aggregated CRS data from 16 countries, covering roughly 30% of the global amount reported by the OECD for the year 2022. Our analysis reveals that the volume of data exchanged internationally has increased and improved substantially over recent years and that CRS-reported foreign wealth accounts for approximately 9% of household financial wealth. Moreover, the data highlights considerably higher average financial holdings in financial centers compared to other jurisdictions. At the same time, a relatively higher share of wealth in financial centers is held through passive corporate structures, indicating the CRS covers the sort of high-risk holdings for which it was designed. The household wealth held in financial centers reported under the CRS is at least 30 percent lower than previous EU Tax Observatory estimates of household offshore financial wealth which could be interpreted as an indication of underreporting. To fully leverage the CRS’s potential efforts to improve data quality and processing should continue. Greater transparency on the part of governments regarding the progress achieved, including public CRS statistics, would promote an informed public debate about international tax evasion and capital flight. |
| Keywords: | Automatic exchange of information, Common Reporting Standard, financial secrecy |
| JEL: | H26 G28 K34 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:report:007 |
| By: | Eva Davoine; Joseph Enguehard; Igor Kolesnikov |
| Abstract: | We examine the political costs of taxation in early modern France. We focus on efforts to enforce the salt tax, the rate of which varied across regions. Using a spatial difference-in-discontinuities design, we compare municipalities just inside the high-tax region with those just outside, before and after a reform aimed at curbing illicit salt smuggling. We find that tax enforcement led to a twenty-fold increase in conflicts between taxpayers and the state in municipalities in the high-tax region. This effect persists until the French Revolution, supporting the view that enforcing the salt tax incurred significant political costs. Finally, we document that the likelihood of conflict increases with tax differences between neighboring regions, which we use to derive an upper bound on the political costs of increased tax enforcement in this historical period. |
| Keywords: | taxation, protest, conflict |
| JEL: | D74 H26 H39 K42 N43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11945 |
| By: | Vera-Cossio, Diego A.; Bosch, Mariano; Leganza, Jonathan M; Mojica Uruena, Tatiana; Oliveri, María Laura |
| Abstract: | We study how public pensions impact lifecycle labor supply decisions. Our analysis centers on pension eligibility rules in Ecuador. We first use administrative data to document and unpack retirement spikes at eligibility ages. Next, we use survey data and regression discontinuity to investigate whether eligibility rules influence earlier-in-life decisions about when to work formally versus informally. We find discontinuous increases in transitions to formal employment at 50, consistent with forward-looking people timing employment to minimize social security contributions while maintaining benefit eligibility. Evidence suggests that small and family firms, where employees and employers may readily coordinate, help facilitate these transitions. |
| JEL: | H55 J26 J46 O12 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14165 |