nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2015‒05‒09
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Tax evasion and measurement error: An econometric analysis of survey data linked with tax records By Paulus, Alari
  2. Mental accounting in tax evasion decisions: An experiment on underreporting and overdeducting By Fochmann, Martin; Wolf, Nadja
  3. Tax compliance and information provision: A field experiment with small firms By Doerrenberg, Philipp; Schmitz, Jan
  4. Égypte 1998-2012 : de l’emploi public protégé à l’emploi informel précaire, un marché du travail en déshérence By Bensidoun, Isabelle; Sztulman, Aude

  1. By: Paulus, Alari
    Abstract: We use income survey data linked with tax records at the individual level for Estonia to estimate the determinants and extent of income tax compliance in a novel way. Unlike earlier studies attributing income discrepancies between such data sources either to tax evasion or survey measurement error, we model these processes jointly. Focussing on employment income, the key identifying assumption made is that people working in public sector cannot evade taxes. The results indicate a number of socio-demographic and labour market characteristics, which are associated with non-compliance. Overall, people in the bottom and the top part of earnings distribution evade much more and about 12% of wages and salaries in total are underreported, which is very substantial for a major income source subject to third party reporting and tax withholding.
    Date: 2015–05–07
  2. By: Fochmann, Martin; Wolf, Nadja
    Abstract: Although there is already a variety of papers analyzing tax evasion decisions, only little focus is put on tax evasion of gains and losses. As taxpayers can evade taxes by either underreporting their income or by overdeducting expenses, we study whether there is a significant difference if subject are confronted with a gain or a loss scenario. We find that individuals evade more in the first than in the latter case. As a consequence, subjects are more willing to evade taxes by underreporting income than by overdeducting expenses. We show that this finding can be explained by mental accounting and an asymmetric evaluation of tax payments and tax refunds. Our result is robust to treatment variation. However, if individuals have to complete only one tax declaration (but still decide on gains and losses) and we therefore expect subjects to use only one mental account, the effect vanishes. This provides strong evidence that mental accounting plays an important role in tax evasion decisions. Further results are presented and discussed.
    Keywords: tax evasion,tax compliance,prospect theory,mental accounting,behavioral taxation,experimental economics
    JEL: C91 D14 H24
    Date: 2015
  3. By: Doerrenberg, Philipp; Schmitz, Jan
    Abstract: We study tax compliance in Slovenia using data generated in a field experiment. Small accounting companies were randomly assigned to an untreated control group and two treatment groups. Companies in the first treatment group received a letter that highlighted the importance of paying taxes and informed about the likelihood of becoming subject to an audit. In the second treatment group, tax officers from the tax authorities handed out in person the same letter that companies in the first treatment group received by post. The results indicate that such letters can increase compliance, and trigger even more compliance if handed over in person. These findings are in line with the theoretical predictions that we derive to rationalize the experiment.
    Keywords: Tax Compliance,Audits,Randomized Field Experiment,Tax authority,Information provision
    JEL: H20 H32 H50 C93
    Date: 2015
  4. By: Bensidoun, Isabelle; Sztulman, Aude
    Abstract: Over the last two decades the Egyptian labor market has undergone major changes that the social claims of the January 2011 revolution brought to light. Among them, lack of job security and associated weak social protection have been particularly criticized. Therefore the aim of this article is to present an overview of employment in Egypt, with a specific focus on the evolution of informal employment. To this end we use individual data from nationally representative household surveys carried out in 1998, 2006 and 2012. The descriptive and econometric analysis illustrates that over the period studied the withdrawal of the state as a provider of employment was very marked. Simultaneously, the state’s lack of commitment to enforce labor laws in the private sector has led to a significant increase in informal employment. Informal jobs concern specifically men, young people and the less qualified workers. Though, over time, age and education provide less effective protection against informal employment. The majority of private sector jobs not only lack social protection but are also becoming more and more insecure.
    Keywords: Labor market; informal employment; Egypt; marché du travail; emploi informel; Égypte;
    JEL: J21 J45 O53
    Date: 2015–04

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