nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2023‒07‒10
six papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. Digital Merchant Payments as a Medium of Tax Compliance By Megersa, Kelbesa; Bernad, Ludovic; Nsengiyumva, Yves; Byinshi, Benjamin; Hakizimana, Naphtal; Santoro, Fabrizio
  2. Bearing the burden – Implications of tax reporting institutions and image concerns on evasion and incidence By Kaisa Kotakorpi; Topi Miettinen; Satu Metsälampi
  3. Technology and Tax: Adoption and Impacts of E-services in Rwanda By Megersa, Kelbesa; Santoro, Fabrizio; Lees, Adrienne; Carreras, Marco; Mukamana, Theonille; Hakizimana, Naphtal; Nsengiyumva, Yves
  4. Do household tax credits increase consumption? The role of demand elasticity and the extent of demand By Jarkko Harju; Sami Jysmä; Aliisa Koivisto; Tuomas Kosonen Koivisto
  5. Overview of the Characteristics of Tax Haven By Dhammika Dharmapala
  6. Green jobs and the city: Towards a just transition in developing countries By Kleibrink, Alexander; Pegels, Anna; Fink, Michael; Scholz, Wolfgang

  1. By: Megersa, Kelbesa; Bernad, Ludovic; Nsengiyumva, Yves; Byinshi, Benjamin; Hakizimana, Naphtal; Santoro, Fabrizio
    Abstract: Digital merchant payments – transactions between traders, or between traders and customers using digital means of payment – can promote tax compliance by providing access to safer, quicker formal payments for consumers, and leaving a digital trail of sales data that can be accessed by tax administration. This study examines how far the potential of digital merchant payments to increase tax compliance is being realised in Rwanda, and whether fees imposed by mobile network operators on digital financial services (DFS) can hinder both DFS adoption and tax compliance. It uses original survey data from 1, 100 merchants country-wide, administrative data from the Rwanda Revenue Authority (RRA), focus group discussions and in-depth interviews. Rwanda is an interesting context in which to study digital merchant payments, as these are expected to reach 80 per cent of GDP by 2024.1 Particularly popular are mobile money payments, performed either through the person-to-business payment option MoMo Pay or through standard personal accounts. The country’s commitment to creating a cashless economy was accelerated due to the COVID-19 pandemic. Summary of Working Paper 159.
    Keywords: Finance, Technology,
    Date: 2023
  2. By: Kaisa Kotakorpi (Finnish Centre of Excellence in Tax Systems Research (FIT), Tampere University and VATT Institute for Economic Research; Hanken School of Economics and Helsinki GSE); Topi Miettinen (Hanken School of Economics and Helsinki GSE); Satu Metsälampi (University of Turku)
    Abstract: We investigate effects of tax reporting institutions on evasion and incidence using an experimental double auction market setting. We find that 28% of the sellers are truthful when only sellers report, but that 88% and 64% of them are truthful under costless and costly third-party reporting by buyers, respectively. Reporting behavior therefore responds to the intensity of deterrence. However, we find that prices do not fully reflect the lower taxes of the evaders. Thus, when sellers can unilaterally evade taxes, tax incidence deviates from the prediction of the standard model, and there is deadweight loss even if tax revenue is low. Pricing, incidence, and reporting patterns in all treatments can be explained by a model of lying costs with image concerns that give rise to a motivation to appear honest.
    Keywords: Tax Evasion, Tax Incidence, Third-Party Reporting, Double Auction, Social image, Experiment
    JEL: H21 H22 H26 D40 D44 D91
    Date: 2022–11
  3. By: Megersa, Kelbesa; Santoro, Fabrizio; Lees, Adrienne; Carreras, Marco; Mukamana, Theonille; Hakizimana, Naphtal; Nsengiyumva, Yves
    Abstract: Many low-income countries are increasingly digitising their tax services, which can bring a range of benefits, from reducing compliance costs and improving record-keeping, to limiting opportunities for corruption and increasing fairness in the tax system. However, the success of these benefits depends on adequate levels of awareness and adoption of e-services among taxpayers; where these levels are suboptimal, tax e-services may produce only partial benefits. This paper examines the extent of awareness and uptake of tax e-services in Rwanda from a pre-pandemic situation up to two years into the COVID-19 crisis. The country has increasingly digitalised its tax administration, even more so during the pandemic. Electronic filing and payment of taxes have been mandatory since 2015, and two different e-services are available: E-tax, a free web-based platform designed to be used on computers and smartphones, and M-declaration, a feature phone-based application which enables mobile money payments and a simpler process for filing a return. This allows us to run a comparative analysis of the two solutions. We apply a mixed methods approach, using a nationally representative panel survey of 2, 000 corporate (CIT) and personal (PIT) income taxpayers, with baseline information collected pre-COVID-19 and four follow-up rounds carried out after the pandemic hit, and focus group discussions (FGDs) with 24 e-services users. Summary of Working Paper 153.
    Keywords: Finance, Technology,
    Date: 2023
  4. By: Jarkko Harju (Tampere University, Finnish Centre of Excellence in Tax Systems Research (FIT)); Sami Jysmä (Labour Institute for Economic Research Labore); Aliisa Koivisto (VATT Institute for Economic Research); Tuomas Kosonen Koivisto (VATT Institute for Economic Research, Finnish Centre of Excellence in Tax Systems Research (FIT))
    Abstract: This paper studies the effects of household tax credit (HTC) on service demand and tax evasion. HTC is a tax credit for consumers to reclaim a share of the labor costs of home improvement services, such as renovation and cleaning work. The aim of this widely used tax credit has been both to increase demand for services to boost employment in the service sector and to curb tax evasion. We use data on firm-level monthly value added tax reports and annual tax filings to study the effects of the introduction of HTC for home cleaning services in Sweden in July 2007 together with a difference-in-differences approach using small Finnish service sector firms as a control group. Our results show that, at best, the HTC system has very limited effects on demand for services in the cleaning sector. We provide counterfactual analysis suggesting that the demand elasticity is low, and that the extent of population consuming cleaning services could be low, which is important to consider in ex ante policy analysis. In addition, we do not find HTC to be ef- ficient in reducing tax evasion. Our survey evidence suggests that consumers are poorly informed about the details of HTC rules, which is one likely explanation for the limited responses to the tax credit.
    Keywords: Household tax credit, demand, employment, consumer price, tax evasion
    JEL: H24 H25 H26 H31
    Date: 2023–03
  5. By: Dhammika Dharmapala
    Abstract: Tax havens have become a subject of great interest among policymakers, scholars and the general public, and are central to many important current policy debates. This chapter provides an overview of the scholarly literature on the characteristics and origins of tax havens. The earlier literature, used cross-country analysis and found evidence that tax havens tend to have stronger governance institutions than comparable nonhaven countries. The more recent literature analyses the historical origins of tax havens and undertakes longitudinal analysis of their adoption of haven-like laws. This chapter also presents a descriptive analysis of the relationship between tax haven status and quantitative measures of countries’ historical characteristics. This descriptive analysis suggests that tax haven jurisdictions are not appreciably different from nonhavens in their historical experience of foreign rule and in other historical characteristics. This suggests some caution in attributing tax havens’ status to their colonial history or to other historical variables.
    Keywords: tax havens, international taxation, colonial history, governance, economic development, comparative economics
    JEL: H87 O10
    Date: 2023
  6. By: Kleibrink, Alexander; Pegels, Anna; Fink, Michael; Scholz, Wolfgang
    Abstract: This policy brief examines actions for a just transition of local job markets in developing countries. We identify building blocks for shifting from carbon-intensive towards green jobs in this transition. Green jobs in cities are key to ensure a just transition of local employment markets, both formal and informal, and make cities function more sustainably. They are part of a wider inclusive green economy aiming at carbon-neutrality and resource efficiency with a focus on human well-being and social equity while paying special attention to local nature-based solutions. The transition will create winners and losers. Both need to be managed if the process and outcomes are to be just.
    Keywords: Green jobs, urbanisation, just transition, developing countries, climate change
    Date: 2023

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