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on Informal and Underground Economics |
| By: | Sanjit Dhami; Narges Hajimoladarvish; Pavan Mamidi |
| Abstract: | We consider income-source-dependent tax evasion and show that this is a generalization of the well-known endowment effect. We show that loss aversion, moral costs, mental accounting, and risk preferences play a key role in explaining key features of source-dependent tax evasion. We provide evidence of the first direct link between subject-specific loss aversion and tax evasion, which is central to most successful modern theoretical accounts of tax evasion. We provide some evidence that risk aversion strengthens the cautionary effect of loss aversion and risk loving behavior attenuates, or reverses, it. However, the underlying effect is also influenced by the source of income. Evasion is increasing in the tax rate and decreasing in the audit penalty, as predicted. Our paper provides novel theoretical insights; proposes new methods in the estimation of the underlying behavioral parameters; and confirms the central predictions of the theory, while pointing out challenges for further developments that existing theory is unable to account for. |
| Keywords: | tax evasion, endowment effect, loss aversion, morality, mental accounting, prospect theory, risk aversion |
| JEL: | C91 C92 D82 D91 G21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10224&r=iue |
| By: | Lilith Burgstaller; Annabelle Doerr; Sarah Necker |
| Abstract: | We study the causal effects of household tax credits on the willingness to demand legally provided services using two survey experiments with 1.974 German homeowners. Participants choose between hypothetical offers of service providers and are randomly assigned to a policy scenario 1) without a tax credit, 2) a tax credit households can claim through the annual tax return, or 3) a tax credit granted by the seller at source. We also vary the refund rate of the tax credit (20/30%) and whether the price including the tax reduction is displayed. All tax credits increase the willingness to pay for offers with invoice as well as the probability to select an offer with invoice. The effectiveness of the tax credit is significantly higher when two attractive features (at source+30%) are combined or when the reduction is made salient. We estimate that about two thirds of respondents who would use the tax credit would have demanded an offer without invoice also without the tax credit. |
| Keywords: | tax credit, financial rewards for compliance, tax evasion, tax compliance, third-party reporting, survey experiment, discrete choice experiment |
| JEL: | H26 C93 E26 J22 O17 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10211&r=iue |
| By: | Marwin Heinemann; Wojciech Stiller |
| Abstract: | The digitalization of transaction processes through tools such as electronic invoicing (e-invoicing) aims to improve tax compliance and reduce administrative costs. Another important aspect of digitalization is its potential to reduce tax evasion. We analyze the impact of the widely introduced e-invoicing in Italy on cross-border value-added tax fraud. As a proxy for this tax fraud, we make use of the discrepancy in trade data that is double-reported in both the importing and exporting country (trade gap). We calculate trade gaps based on product flows on the most detailed level between Italy and the remaining countries of the European Union. Our results suggest a significant decline in cross-border fraud in response to the introduction of mandatory e-invoicing, providing an important rationale for the application of this measure by other countries. Furthermore, we estimate that e-invoicing decreased the Italian revenue loss by €0.6 billion to €1 billion in 2019. This is in line with the statements of the Italian Ministry of Finance, which are probably based mainly on the revenue development. In this context, we underpin the suitability of the trade gap as an approach for the study of anti-fraud measures and provide a more accurate estimate of cross-border fraud. In addition, our study suggests that fraudsters shift their activities to similar products and drive honest traders out of the market. |
| Keywords: | e-invoicing, digitalization, international trade, VAT fraud, trade gap |
| JEL: | F14 H21 H26 K34 K40 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10227&r=iue |
| By: | Matthew Collin; Florian M. Hollenbach; David Szakonyi |
| Abstract: | The United Kingdom's (UK) property markets are thought to be a common destination for corrupt and criminal assets and money laundering, with investment often through offshore shell companies. Following the Russian invasion of Ukraine in 2022, we study the impact of the introduction of a policy in the UK intended to increase transparency and eliminate the anonymous ownership of property by requiring offshore companies to file their ultimate beneficial owners on a public register. |
| Keywords: | Money laundering, Real property, Ownership, Transparency, Tax evasion, Corruption |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2023-11&r=iue |
| By: | Dagher, Leila; abboud, ali; sidani, ola; Abi Younes, Oussama |
| Abstract: | In many countries, early, large, and sustained policy responses to the pandemic were successful in protecting families. However, the Government of Lebanon’s (GoL) response to COVID-19 and the simultaneous crises the country is experiencing, in terms of socio-economic recovery measures, has been very limited if not absent. This research aims to analyze the impact of the lack of government actions and policies on the urban informal labor sector in Lebanon. The informal sector, which makes up a significant portion of the Lebanese economy (estimated to be at least 30% of GDP), is of interest to us as very few of the measures taken by GoL such as tax grace periods, were targeted at the formal sector. Led by the American University of Beirut (AUB) and funded by Oxfam, the project “For Inclusive and Fair Covid-19 Socio-Economic Recovery Measures in Lebanon, ” aims to assess the GoL decisions related to the pandemic and to influence the orientation of government decisions such that they take into consideration the impact on the most vulnerable population groups, especially those working in the informal sector. |
| Keywords: | lebanon; social protection; social assistance; social safety net; poverty; informal sector |
| JEL: | H12 H53 H55 I3 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116133&r=iue |
| By: | Dagher, Leila; abboud, ali; sidani, ola; Abi Younes, Oussama |
| Abstract: | In many countries, early, large, and sustained policy responses to the pandemic were successful in protecting families. However, the Government of Lebanon’s response to COVID-19 and the simultaneous crises the country is experiencing, in terms of socio-economic recovery measures has been very limited, if not absent. Led by the American University of Beirut (AUB) and supported by Oxfam, the project “For Inclusive and Fair COVID-19 Socio-Economic Recovery Measures in Lebanon, ” investigates the impact of the pandemic and concurring crises on the employment and living conditions of the urban informal sector in Lebanon. The informal sector makes up a significant portion of the Lebanese economy (54% of the labor force before the start of the crisis). Furthermore, the project evaluates the government’s response to both the health and economic challenges posed by the crises. The field work shows that the pandemic led to significant loss of employment and income among the population of interest. Household living conditions deteriorated drastically, leading the majority of households to resort to negative coping mechanisms. Government intervention was limited in scope and impact and failed to alleviate the daily hardships faced by the vulnerable population. Finally, we conclude with a series of short- and long-term policy recommendations that build on the evidence provided in this research work as well as lessons learned. |
| Keywords: | poverty; social safety net; social assistance; social protection; informal sector; covid19 |
| JEL: | H12 H53 H55 I3 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116132&r=iue |
| By: | Derder Nacéra (UMBB - Université M'Hamed Bougara Boumerdes); Benammar Abdelkader (Ecole Supérieure de Commerce –Koléa, (Algérie)) |
| Abstract: | This study aims to identify the extent of informal finance in Algeria, to review the main decisions taken by the central bank in its fight against the informal and discuss their impact on informal finance. Faced with an informal finance that persists, new actions must be taken, not only on the regulatory level, but must also be part of a strategy aimed at strengthening the operational efficiency of the banking system. |
| Abstract: | Ce travail vise à mettre la lumière sur l'importance de la finance informelle en Algérie, de passer en revue les principales décisions prises par la banque centrale dans sa lutte contre l'informalité et de ressortir leur impact sur la finance informelle. Face à une finance informelle qui perdure, de nouvelles actions doivent être engagées, non seulement sur le plan réglementaire, mais doivent aussi s'inscrire dans une stratégie visant à renforcer l'efficacité opérationnelle du système bancaire. |
| Keywords: | banque d'Algérie secteur informel finance informelle formalisation. Code jel : E26. G21. G29 bank of Algeria informal sector informal finance formalization. Jel Classification Codes : E26. G21. G29, banque d'Algérie, secteur informel, finance informelle, formalisation. Code jel : E26. G21. G29 bank of Algeria, informal sector, informal finance, formalization. Jel Classification Codes : E26. G21. G29 |
| Date: | 2022–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03904818&r=iue |