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on Informal and Underground Economics |
| By: | Era Dabla-Norris; Florian Misch; Duncan Cleary; Munawer Khwaja |
| Abstract: | Tax compliance costs tend to be disproportionately higher for small and young businesses. This paper examines how the quality of tax administration affects firm performance for a large sample of firms in emerging market and developing economies. We construct a novel, internationally comparable, and multidimensional index of tax administration quality (the TAQI) using information from the Tax Administration Diagnostic Assessment Tool. We show that better tax administration attenuates the productivity gap of small and young firms relative to larger and older firms, a result that is robust to controlling for other aspects of tax policy and of economic governance, alternative definitions of small and young firms, and measures of the quality of tax administration. From a policy perspective, we provide evidence that countries can reap growth and productivity dividends from improvements in tax administration that lower compliance costs faced by firms. |
| Date: | 2017–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:17/95&r=iue |
| By: | Mukuma, Denis; Karangwa, John; Hakizimana, Naphtal |
| Abstract: | The journey from coercion to persuasion to drive tax compliance started gradually for the Rwanda Revenue Authority (RRA). This is shown in the mission and core value statements that underpin the tax administration’s activities in service delivery and trade facilitation. Recently the RRA has undertaken aggressive tax education and sensitisation campaigns in order to influence taxpayer behaviour towards more voluntary compliance, having limited resources to undertake enforcement. In the absence of any significant impact evaluation, however, it is hard to determine the effect of these endeavours on the intended outcome of voluntary compliance. The tax administration had the opportunity to review the effectiveness of its communication strategy through a tax compliance experiment, which involved delivering various messages using different means and evaluating taxpayer behaviour. Although many taxpayers reacted positively to these messages, particularly through upward revisions to their tax returns, there were a significant number whose reactions were not captured – necessitating a further study to investigate why these taxpayers had not reacted in any way. This paper reveals some interesting findings from this study, including the need to remind taxpayers more frequently, and to provide additional information on top of reminders. The paper also shows that taxpayers prefer to receive information on usage of public funds instead of threatening messages (deterrent), which is consistent with the findings of the tax compliance experiment. |
| Keywords: | Taxation, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:12964&r=iue |
| By: | Hentze, Tobias |
| Abstract: | The European Commission will present its proposal for more corporate tax transparency these days. The so-called Country-by-Country Reporting will force large multinational enterprises to publish country specific profits and tax payments. By emphasizing positive aspects such as disclosing the tax contributions of global corporations, the European Commission forgets to look at the increasing red tape burden for companies and to address tax loopholes established by the national governments in the EU member states. It also risks competitive disadvantages and reputational damage for MNE by publishing sensitive company data. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkkur:142016&r=iue |
| By: | Igor Bagayev; Ronald B. Davies; Panos Hatzipanayotou; Panos Konstantinou; Marie Rau |
| Abstract: | In contrast to developed countries, developing nations are especially reliant on trade taxes, particularly tariffs, as a source of government revenue. As such, tariff liberalization provides them with an incentive to switch towards other revenue generating trade barriers such as anti-dumping duties. The effectiveness of this is potentially limited due to the greater enforcement challenges with the exporter specific anti-dumping relative to broad-based tariffs. We examine this by estimating the impact of anti-dumping measures for 82 importing countries from 2008-2014. We find that anti-dumping's trade effects are larger for countries with greater policy enforcement, especially in low income countries. Although the results are somewhat sensitive to the measure of enforcement, our overall findings indicate that for countries with weak enforcement, tariff liberalization combined with a shift towards non-tariff barriers like anti-dumping is likely to lower government revenues and hamper their ability to provide the infrastructure and education needed for development. |
| Keywords: | Anti-dumping; Enforcement; Non-tariff barriers; Tax revenues; Shadow economy |
| JEL: | F13 F15 H27 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201706&r=iue |
| By: | Solis-Garcia, Mario; Xie, Yingtong |
| Abstract: | We propose a methodology for measuring the size and properties of the shadow economy. We use a two-sector dynamic deterministic general equilibrium model with four different trends: hours worked, investment-specific productivity, formal productivity, and shadow productivity. We find that the shadow productivity trend is endogenous, in the sense that it is an exact function of model parameters and the other three trends. We also document that, in order to be consistent with observed (real-world) trend growths, the shadow sector needs to exhibit increasing returns to scale, which is contrary to the standard procedure of imposing decreasing returns to this sector. We apply our methodology to a set of seven Latin American and Asian countries and document several empirical regularities that emerge from our analysis, the most important one being that the volatility of shadow sector output is considerably larger than the one in formal sector output. |
| Keywords: | shadow economy, business cycles, DSGE models |
| JEL: | E26 E32 O17 |
| Date: | 2017–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78968&r=iue |
| By: | Solis-Garcia, Mario; Xie, Yingtong |
| Abstract: | Why is GDP more volatile in developing countries? In this paper we propose an explanation that can account for the substantial differences in the volatility of measured real GDP per capita between developing and developed countries. Our explanation involves the often overlooked fact that developing economies have a sizable shadow economy. We build a two-sector model that distinguishes between measured (formal) and total (formal and shadow) outputs; using data from Latin America, our model results suggest that developing and developed economies are fairly similar in terms of the volatility of total real GDP. We also document an apparent puzzle, in that the model suggests that the volatility of the size of the shadow economy should be substantially larger than what is observed in the real world. We believe that this may be indicative of frictions that prevent agents from optimally moving between the formal and shadow economies. |
| Keywords: | shadow economy, business cycles, DSGE models, Bayesian estimation |
| JEL: | E26 E32 O17 |
| Date: | 2017–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78965&r=iue |
| By: | Haroon Bhorat; Kezia Lilenstein; Morné Oosthuizen; Amy Thornton (University of Cape Town; Deputy Director) |
| Abstract: | This paper sets out to update the impression of vulnerability in the labour market, by examining how low pay and informality interact with each other, and with poverty. Throughout, we try to include comparative results from within the sub-Saharan Africa and Latin American regions. What becomes clear is that a job alone is not a solution to poverty in South Africa. And informality in South Africa plays an important role as a buffer to unemployment in contrast to the higher levels of voluntary informality in Latin America. |
| JEL: | I3 J31 J46 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:ctw:wpaper:201604&r=iue |
| By: | Asongu, Simplice; Nwachukwu, Jacinta |
| Abstract: | This study assesses the role of ICT (internet and mobile phone penetration) in complementing financial sector development (financial formalization and informalization) for financial access. The empirical evidence is based on Generalised Method of Moments with 53 African countries for the period 2004-2011. The following findings are established from linkages between ICT, financial sector development and financial activity. First, the interaction between ICT and financial formalization (informalization) decreases (increases) financial activity. Second, with regards to net effects, the expected signs are established for the most part. In spite of the negative marginal effects from financial informalization, the overall net effects are positive. Third, the potentially appealing interaction between ICT and informalization produces positive thresholds that are within ranges. Policy implications are discussed in three main strands. They include implications for (i) mobile/internet banking; (ii) a quiet life and (iii) ICT in reducing information asymmetry and surplus liquidity. |
| Keywords: | Allocation efficiency; Financial sector development; ICT |
| JEL: | G20 G29 L96 O40 O55 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78863&r=iue |
| By: | Asongu, Simplice; Nwachukwu, Jacinta |
| Abstract: | This study assesses the role of information sharing in financialization (or coexistence of financial sub-systems) for financial access. The empirical evidence is based on contemporary and non-contemporary Fixed Effects and Quantile regressions on 53 African countries for the period 2004-2011. The positive complementarity of information sharing offices (ISOs) and financial formalization is an increasing function of financial activity (or access to credit) whereas the negative complementarity of ISOs and financial informalization is a decreasing function of financial activity. In order to leverage on the synergy between ISO and financial formalization for enhanced financial access, some policy measures are proposed. |
| Keywords: | Information Asymmetry; Financialization; Financial Access |
| JEL: | G20 G29 L96 O40 O55 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78862&r=iue |
| By: | Ivan Turok; Josh Budlender; Justin Visagie (HSRC; Professor) |
| Abstract: | The paper uses longitudinal data for South Africa to explore the magnitude of social progression among people living within informal settlements compared with the residents of rural areas and formal urban areas. The objective is to assess whether shack settlements foster or frustrate human progress in the way they link people to the services, contacts and livelihoods concentrated in cities. |
| Keywords: | Informal urban settlements; South Africa; social mobility; livelihoods; rural-urban migration |
| JEL: | E26 I3 J46 O17 R0 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ctw:wpaper:201701&r=iue |