|
on Informal and Underground Economics |
| By: | Enrico Di Gregorio (International Monetary Fund); Matteo Paradisi (EIEF); Elia Sartori (CSEF) |
| Abstract: | We show that tax authorities can stimulate tax compliance by strategically releasing audit-relevant information. We focus on audit policies that disclose to taxpayers that audit risk discretely drops above a threshold determined by their predicted revenues. In a theoretical framework, we derive conditions for the existence of improvements over flat undisclosed audit rules, and we build a test for such improvements that relies on a change in the probability jump at the threshold. Our empirical analysis relies on the Sector Studies, an Italian policy with a disclosed threshold-based design. We leverage more than 26 million Sector Study files submitted between 2007 and 2016. First, we show that taxpayers bunch at the threshold to a great extent, and that this behavior is related to evasion proxies, availability of evasion technologies, and tax incentives. Then, we exploit a staggered Sector Studies reform that widens the initial audit risk discontinuity. In line with our theory, taxpayers who benefit from audit exemptions above the threshold reduce their relative compliance, while those below the threshold improve it. However, mean reported profits increase by 16.2% in treated sectors over six years, suggesting – in light of our test – that a disclosed rule performs better than an undisclosed one. |
| Keywords: | tax compliance, enforcement, evasion, audit, disclosure, firm, bunching. |
| JEL: | D04 D22 H24 H25 H26 H32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:729 |
| By: | Franz Ostrizek (Sciences Po); Elia Sartori (CSEF) |
| Abstract: | We investigate the behavioral foundations of informed trade. We extend the canonical (Kyle, 1989) model to allow for wide range of misperception about the information environment (e.g. overconfidence and correlation delusion) as well as the market clearing condition (e.g. understatement of individual impact) and ask when a trading equilibrium can exist. We show that existence requires either i) the market clearing rule being perceived with (cognitive) noise of arbitrary size, or ii) sufficiently strong misperceptions that lead traders to overestimate the precision of their private information (relative to that of others) or underestimate their market impact. Following i) provides a cognitive foundation for the noise trader approach, while ii) yields a highly tractable linear model of (sufficiently) biased traders. Fixing the bias, a higher number of traders is beneficial for existence, though the economy is typically discontinuous in the countable-trader limit. In the latter case, equilibrium is characterized by limit uncertainty, a property which is satisfied if and only if traders perceive some correlation in their competitors’ information. |
| Keywords: | tax compliance, enforcement, evasion, audit, disclosure, firm, bunching. |
| JEL: | D04 D22 H24 H25 H26 H32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:730 |
| By: | Heller, Lorena; Nogales, Ricardo |
| Abstract: | Over 30 percent of female workers are self-employed across Latin America, relying on this mode of work for subsistence. Self-employment in the region is regularly marked by the absence of health insurance and lack of pension benefits. Despite the aspirations of many women to gain access to these benefits, they are persistently overrepresented among the socially unprotected part of the workforce. To address this issue and explore potential solutions, we conducted a laboratory experiment in Bolivia to assess the efficacy of nudges to influence the behavior of self-employed women. Participants were randomly assigned to one of six groups, each receiving either an informative message highlighting the benefits of contributing to a long-term pension system, a message emphasizing the advantages of health insurance, or a nudge aimed at reducing the effort and costs associated with enrolling in a savings or retirement plan. Our findings indicate that informative messages alone were effective in increasing voluntary contributions to experimental pension and health insurance schemes. Reductions in time and effort required for enrollment did not lead to a significant increase of voluntary contributions. Moreover, we found that the effectiveness of these interventions varied depending on the type of worker, with high-effort workers being the most responsive. |
| Keywords: | Self-employment;Pension system;Health Insurance;Laboratory experiment |
| JEL: | C91 J16 J20 J70 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13754 |
| By: | - |
| Abstract: | This document is the report of the Third Regional Seminar on Social Development “Promoting labour inclusion as a way to overcome inequalities and informality in Latin America and the Caribbean”. This seminar was organized by the Social Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC) in collaboration with the International Labour Organization (ILO) and in partnership with the Government of Norway, the Ford Foundation and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and was held from 27 to 29 June 2023. In its third edition, the Regional Seminar focused on providing a space for dialogue, reflection and sharing experiences on labour inclusion policies as a means of overcoming inequalities and informality in Latin America and the Caribbean. The seminar was attended by government representatives from 12 countries of Latin America and the Caribbean, including 10 labour ministers from countries of the region, as well as representatives from the business and trade union sector, renowned professors and researchers, and professionals and technical experts from international organizations such as ILO, the Inter-American Development Bank (IDB) and the Organisation for Economic Co-operation and Development (OECD). |
| Date: | 2024–08–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecr:col043:80567 |
| By: | Benjamin A. Olken; Rema Hanna; Phitawat Poonpolkul; Nada Wasi |
| Abstract: | Many government social insurance policies have low take-up. To understand whether this is due to administrative barriers, information, or low valuation of the insurance, we study an unusual policy experiment in Thailand that offered a very large lump-sum incentive for informal workers in selected provinces to enroll in a voluntary workers’ social insurance program. Using administrative data, we find that the temporary enrollment incentive increased coverage by 67 percentage points – from 6 percent of informal workers to 73 percent – within just a few months. However, 12 months later, only 13 percent of these new enrollees remained in the scheme, much lower than the retention rate of those who joined absent the incentive. By using new enrollees’ choices among insurance tiers to back out a revealed valuation of insurance, we find that those who were induced to enroll by the incentives value insurance less than those who enrolled without. Combined, the results suggest that low social insurance enrollment may be the result of low ex-ante valuations of the insurance, rather than administrative barriers. |
| Keywords: | Informal workers; Voluntary social insurance; Cash assistance |
| JEL: | O17 H31 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:223 |
| By: | Léo Czajka (Université Catholique de Louvain); Bassirou Sarr (Ministère des Finances et du Budget, République du Sénégal); Mattea Stein (Università di Napoli Federico II and CSEF) |
| Abstract: | Tax administrations in low-income countries face widespread tax evasion and high enforcement costs. They thus need information to detect where tax evasion is most severe, and allocate scarce resources accordingly. This paper shows that leveraging large firms’ trading network to collect information about their suppliers is a cost-efficient way to detect tax evasion and increase future audit returns. We collaborate with the Senegalese tax administration on a vast data collection effort to digitise lists of payments submitted by the largest firms and show that 88.6% of these firms provide incomplete information about their suppliers. This prevents any cross-checking against income declared by the suppliers themselves. We then randomise a low-cost communication campaign across all 3, 487 misreporting firms, to discourage future misreporting. The intervention increases the prevalence of suppliers’ identification information by 52%. In aggregate, this allows to uncover $145.5 million in unreported revenue (i.e. 0.5 % of GDP). Most of it accrues to a few tax-registered suppliers, as opposed to informal ones. A simulation exercise shows that exploiting the newly available information to target the largest under-reporting suppliers would increase audit returns by at least 100%. |
| Date: | 2024–07–05 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:731 |
| By: | Boyer, Marcel; El Moussaoui, Hicham; Petkantchin, Valentin |
| Keywords: | Microentrepreneurs; institutions; coûts de transactions; économie informelle; approvisionnement en eau; rentabilité, formalisation |
| JEL: | D02 D04 D23 E14 E26 H44 O17 P37 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129827 |