nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2016‒10‒30
five papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Dual Corporate Tax Evasion By Katherine Cuff; Steeve Mongrain; Joanne Roberts
  2. Is consumption-Laffer curve hump-shaped? The role of VAT evasion By Vasilev, Aleksandar
  3. The Effects of Media Campaigns on Individual Attitudes towards Tax Compliance; Quasi-experimental Evidence from Survey Data in Pakistan By Musharraf Rasool Cyan; Antonios M. Koumpias; Jorge Martinez-Vazquez
  4. Public policies promoting the informal economy: effects on incomes, employment and growth in Burkina Faso By Traoré, Jean Abel; Ouedraogo, Idrissa Mohamed
  5. Essai des indices FGT d’incidence, de profondeur et de sévérité de l’informalité en RDC By Izu, Akhenaton

  1. By: Katherine Cuff (McMaster University); Steeve Mongrain (Simon Fraser University); Joanne Roberts (University of Calgary)
    Abstract: Firms are subject to many forms of government regulation and laws. Two major sources of these regulations are corporate tax laws and labour or employment laws. For example, labour codes stipulate that firms must ensure their workplaces meet certain safety and health standards, and pay payroll taxes to cover the provision of government provided benefits to their workers, whereas corporate tax laws require firms to collect sales taxes on goods sold and pay taxes on their income or profits. There are many ways for firms to evade these legal requirements. Much of the literature examining the evasion behaviour of firms assumes that the decision to evade one form of regulation (such as labour regulation) is perfectly linked to the decision to evade another (such as paying business corporate taxes). In this paper, we separate these two evasion decisions and allow firms to decide whether to evade labour market regulations (including the payment of payroll taxes) independently from their decisions to evade corporate taxes. We characterize the firms’ optimal entry and evasion behaviour and derive the government's optimal tax policies.
    Keywords: Informal Labour Market; Labour Regulation; Tax Evasion; Payroll taxes; Corporate Income Taxes
    JEL: H32 H26 K42
    Date: 2016–10–13
  2. By: Vasilev, Aleksandar
    Abstract: This paper shows a standard RBC model, when augmented with a VAT evasion channel, where evasion depends on the consumption tax rate, can produce a hump-shaped consumption Laffer curve. Furthermore, when the evasion channel is turned off, the hump in the Laffer curve disappears, resulting in a monotone relationship between the VAT rate and both the consumption and total tax revenue. This result comes in stark contrast to Hiragara and Nituhara (2015), who generate a peaking curve for consumption tax revenue in a model with a separable utility in consumption and leisure and no evasion. Their results are contingent on implausible values for elasticity parameters, and in addition predict a revenue-maximizing consumption tax rate which is implausibly high. The paper contributes to the public finance literature by providing evidence for the importance of the evasion mechanism, while at the same time adding to the debate about the existence of a peak tax rate for consumption tax revenue.
    Keywords: consumption Laffer curve,VAT evasion,general equilibrium,fiscal policy
    JEL: D58 E26 H26
    Date: 2016
  3. By: Musharraf Rasool Cyan (Department of Economics, International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Antonios M. Koumpias (Department of Economics, International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: Pakistan has consistently performed low on taxation, with revenue collection hovering around 10 percent of GDP. Tax reforms have been attempted but without significant gains in revenue collection. Due to the recalcitrance of tax revenues, the tax authority attempted to enlist voluntary compliance as one of the avenues for its efforts to increase collections. This paper examines the effectiveness of media campaigns in the TV and national newspapers used by the Federal Board of Revenues of Pakistan to increase awareness, tax filing, and, ultimately, tax morale. We use survey data that were collected in 2014 immediately after a communication campaign by PakistanÕs Federal Board of Revenue. Using coarsened exact matching, we construct treatment and control groups that are nearly identical in terms of pre-treatment balance of demographic and behavioral predictors of high tax morale. We find improved perceptions towards tax compliance in Pakistan for respondents exposed to the TV and newspaper advertisements. The choice of the advertisementÕs delivery device is important since the latter is more effective. Our findings provide empirical evidence that well timed campaigns can enhance voluntary compliance in tax filing.
    Date: 2016–10
  4. By: Traoré, Jean Abel; Ouedraogo, Idrissa Mohamed
    Abstract: Since the 1990s, Burkina Faso has intensified the implementation of supporting policies to enhance the access to capital and liquidity in the informal economy. This paper analyzes the effects of these policies on incomes, employment and economic growth by taking into account the interactions between the informal sector, the formal sector and the agricultural sector. For that purpose, policy shocks are simulated through the Partnership for Economic Policy Network’s static computable general equilibrium model which is adapted to the structure of a 2008-based social accounting matrix developed by the International Food Policy Research Institute. Our results highlight mixed effects including a paradoxical contraction of the informal sector, the formal sector and economic growth as well as an improvement of the informal households and the farmers’ incomes.
    Keywords: Informal economy, Public Policies, CGE model
    JEL: E16 E26 H81 O17
    Date: 2015–12–01
  5. By: Izu, Akhenaton
    Abstract: On the basis of the objective to seize, in quantified terms, the depth and the loss of tax resources that causes the informal sector, this paper starts from an empirical definition of the informal sector based on the criterion of recording to the register of trade. From there, we had developed the approach of informality per imposition from which the indices of incidence, depth and severity of the informality were developed starting from indices FGT of poverty. The results of indices here high developed provide that 68.31% of the urban informal enterprises do not pay a tax, that is to say 2300000 urban informal enterprises, and the loss of earnings enormous is estimated at 12% of lost revenues from taxes each year following the weight of the urban informal sector.
    Keywords: Informal Sector, Poverty, Tax
    JEL: H20 I32 O17
    Date: 2016–03–20

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