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on Informal and Underground Economics |
| By: | Hjalte Fejerskov Boas (Department of Economics, University of Copenhagen); Mona Barake (Skatteforsk, NMBU) |
| Abstract: | Cryptocurrencies pose substantial challenges to tax enforcement due to their anonymous and decentralized properties, undermining conventional regulatory practices. We study the impact of an ambitious new enforcement initiative aimed at addressing these challenges: domestic third-party reporting of crypto income. We estimate tax compliance and behavioral responses to this new policy by combining unique Danish microdata from domestic crypto platforms, administrative tax records, and cross-border bank transfers. Despite the introduction of domestic third-party reporting, over 90% of crypto investors do not declare crypto income. Moreover, we identify a significant and persistent evasion response to the policy as investors shift trading activity from domestic platforms, subject to third-party reporting, to foreign platforms outside regulatory reach. Our findings underscore the limits of domestic enforcement strategies in addressing tax evasion for decentralized, borderless assets like cryptocurrencies, highlighting the need for international coordination. |
| Keywords: | Cryptocurrencies, Tax compliance, Tax enforcement |
| JEL: | D31 H24 H26 H31 G5 |
| Date: | 2024–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:2421 |
| By: | Terzic, Saudin |
| Abstract: | The capacity of a country to collect taxes can significantly impact its economic development, regardless of its economic system and social-political order. Governments carefully consider the amount of tax revenue they need to collect when determining their short- and medium-term fiscal policy goals. This paper's goal is to examine the problem of estimating Bosnia and Herzegovina's (BiH) tax capacity and to present evidence of the elements that impact tax capacities based on the opinions of tax practitioners in this area through gender analysis. The sample in this study used a simple random sampling method. The results of the research are the formulation of some conclusions regarding the tax capacity and specific factors of social benefits and security regulation and regulation of the shadow economy, therefore, it is necessary to change them in many aspects. In order to determine which factors have the biggest impact on tax capacity, the article uses both theoretical and empirical analyses. The empirical analysis uses a chi-square proportion test |
| Keywords: | tax, tax capacity, gender analysis |
| JEL: | H26 |
| Date: | 2024–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122846 |
| By: | David R. Agrawal; Laura V. Zimmermann |
| Abstract: | This paper studies the effects of transitioning from a system of sales taxes to a value-added tax (VAT) on firm-level outcomes. We construct a dataset of product- and state-specific tax rates before and after India gradually switched from a sales tax to a VAT. Exploiting staggered state-level adoptions, we first show that following the transition, effective tax rates declined substantially and complexity as measured by various proxies generally also fell. We then show that sales increased by 57% in the medium run. The reform resulted in increased earnings for workers and higher amounts of capital and digital accounting. |
| Keywords: | value added tax, sales tax, production efficiency, firms |
| JEL: | H21 H25 H26 H71 O17 O23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11469 |
| By: | Damiani Genaro Martín |
| Abstract: | This paper provides new theoretical insights into the causes and consequences of indirect tax evasion. I propose a decision-making framework that contemplates biased perceptions of apprehension probabilities, which are affected by the environment where the agents operate. This microfounded formulation allows for the analysis of how taxation affects tax evasion (and vice versa) in the aggregate, emphasizing the existing relationships between the relative size of the shadow economy, tax rates, and government revenue. It is shown that a traditional Laffer curve (inversely U-shaped and with a unique maximum) can only exist under certain conditions. The maximum government revenue attainable turns out to be, in any case, lower than in the absence of tax evasion. Nevertheless, evasion control policies are proven to be always effective in increasing government revenue. |
| JEL: | H26 K42 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4724 |
| By: | Nicolas Ajzenman; Guillermo Cruces; Ricardo Perez-Truglia; Darío Tortarolo; Gonzalo Vazquez-Bare |
| Abstract: | This paper investigates the impact of a progressive tax reform on tax compliance. We leverage a major progressive tax reform in a large Argentine municipality. First, we use a quasi-experimental design to estimate the causal effect of changes in a household's own tax rates on its tax compliance. Second, we utilize a large-scale natural field experiment to examine whether, holding a household's own tax rates constant, tax compliance is influenced by the tax rates of poorer or richer households. We find that reducing taxes for poorer households increases their compliance, while increasing taxes for richer households decreases their compliance. When poor households learn about the tax hike on the rich, this increases their perceived fairness of the tax system and their tax compliance. When rich households learn about the tax cuts for the poor, their perceived fairness increases significantly, but their compliance, if anything, goes down. Leveraging another reform (and another field experiment) that took place a year later, we show that both the quasi-experimental and experimental findings replicate. Our evidence highlights that tax compliance depends not only on a household's own tax rate but also on its perception of the broader tax schedule. Our findings also highlight the gap between stated and revealed preferences for redistribution. Lastly, we conduct a counterfactual analysis to illustrate the implications of our findings for the design of tax policies. |
| JEL: | C93 D31 H24 H26 H71 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33286 |
| By: | Cogneau, Denis; Mo, Zhexun |
| Abstract: | We examine the enforcement of two pillars of colonial rule in French West Africa, military conscription and head tax collection, using novel district-level data from 1919 to 1949. Colonial states are often characterized as either omnipotent Leviathans or administration on the cheap. Our findings reveal their notable coerciveness in achieving key objectives. Military recruitment targets were consistently met, even amid individual avoidance and poor health conditions, by drawing on a pool of eligible fit young men. Tax compliance was similarly high, with approximately 80% of the liable population meeting obligations. Spikes in head tax rates significantly increased tax-related protests, likely prompting caution among colonial administrators. The tax burden was adjusted according to perceived district affluence, and tax moderation was applied in times of crisis. However, local shocks such as droughts or cash crop price collapses were largely ignored. These results underscore the capacity of colonial states to enforce their authority despite limited policy responsiveness, offering new insights into the political economy of colonial governance. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2024–12–09 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:7wnsz |
| By: | Syed Mainul Ahsan; Syed M. Ahsan |
| Abstract: | This paper, originally designed to focus on discovering a suitable tax structure that befits an aspiring LMIE as it advances toward the UMIE status. On reflection, it becomes evident that it is hard to meaningfully deliberate on the composition of taxes without focussing in equal measure on the issue of the size of tax revenue at stake, namely the tax effort. The transition to UMIE must embrace public’s demand for a healthcare system fully in compliance with the WHO criteria of UHC, for quality human capital, and for both a physical and IT infrastructure consistent with faster growth over the next decade or so. We explore the probable causes of low revenue effort and an unchanged structure of taxes and their persistence over the recent decades. Finally, we delve into the issues of fundamental reforms of the tax system as well as of the softer aspects of tax reform, namely that of tax administration, evasion and compliance. |
| Keywords: | tax structure, taxable capacity, tax handles, tax compliance, tax evasion, informal economy, inheritance and property taxation |
| JEL: | B12 H21 H22 H24 H25 H26 H27 H55 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11484 |
| By: | Trombetta Martin; Micha Ariela; Pereyra Francisca |
| Abstract: | The COVID-19 pandemic has highlighted the importance and fragility of care systems globally, resulting in multiple new challenges for women, who comprise the majority of workers in this sector. In particular, domestic work is the main source of employment for vulnerable women in Argentina, a sector globally characterized by high degrees of informality, low pay, and precarious working conditions. In this context, digital labor platforms are emerging as new contracting intermediaries, thus raising questions on their impact in terms of the generation of new labor and income opportunities for women. This article inspects the role of platforms in the definition of working conditions for domestic workers, by considering their influence in the formalization of the sector. Empirical evidence is provided to evaluate the contribution of platforms to the establishment of formal employment contracts for domestic workers. Based on survey data from 300 women working through the sector's leading platform in the Metropolitan Area of Buenos Aires (transformed into 1048 worker-job observations), a fixed-effects model is estimated at the job level to measure the formalization effect of the platform. Results show that working through the platform almost triples the probability of landing a formal job, controlling for both observable and unobservable attributes of workers. |
| JEL: | J4 C2 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4768 |
| By: | Kaputula, Mboyonga; Oliveira Cunha, Juliana |
| Abstract: | This policy brief explores the need to strengthen the collection of recurrent property taxes and the role of technology for property identification and valuation in Lusaka. |
| JEL: | E6 R14 J01 |
| Date: | 2024–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126095 |
| By: | Kowsar Yousefi (Sharif University of Technology); Samad Alaamati |
| Abstract: | While governments justify trade bans in terms of home protection and controlling currency crises, traders employ different circumvention tactics. We evaluate the impact of a substantial import prohibition policy in Iran since 2018 on the trade evasion. The prohibition was enforced after a currency crisis, led by sanctions, and banned the importation of more than 1300 HS8 products. Our methodologies are difference-in-difference (DiD) and event studies. Covariates like tariffs, value-added tax, and product trends are controlled. Findings indicate that the prohibition caused a substantial rise in evasion, with an estimate of about 20%. As a piece of advice to policymakers who aim to control the demand for foreign currency in a crisis, our results show that evasion neutralizes a considerable part of the prohibition. Though, other means of circumventions like misclassifications and barter informal trade have an additional role in neutralization, that could be measured in future studies. |
| Date: | 2024–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1717 |
| By: | Shakeel, Jovera; Attique, Iman; Nadir, Munazza |
| Abstract: | According to the Ministry of Finance, more than 40 percent of Pakistan’s GDP is attributed to the informal sector. Nearly 75 percent of Pakistan’s working-age population is employed in the informal sector, according to the Labour Force Survey (2020-2021). The widespread persistence of the informal sector has several manifestations in the country’s agricultural economy. This study analyses the impact of the informal economy on agricultural productivity in Pakistan by applying Stochastic Frontier and Principal Component Analysis models using the Pakistan Standards of Living Measurement (PSLM) farm-level data collected in 2014, 2016, and 2019. It is the first regionally and nationally representative study of the informal economy’s impact on agricultural indicators using the country’s largest dataset. These findings show, as prior literature has suggested, that farms utilizing formal economic relations, including better working employment contracts, more access to proper credit resources, and better irrigation systems, produce higher yields than farms that operate within informal structures. In addition, crop diversification and resource allocation were found to be significant in raising the efficiency of agriculture. But there is also a geographical dimension to productivity - some of the agro-climatic regions are lagging consistently implying a case for focused attention. |
| Keywords: | Agricultural Productivity, Farm Efficiency, Cropping Patterns, Agro-climatic Zones, Crop Diversification, Informal Economy, Stochastic Frontier Analysis, Resource Allocation |
| JEL: | C13 Q10 Q12 Q15 |
| Date: | 2024–09–16 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122828 |
| By: | Cardinale Lagomarsino Lucio; Rivas Diego |
| Abstract: | El documento “Informalidad tributaria en Argentina” se elaboró para aportar al debate de la informalidad impositiva en nuestro país. El objetivo del trabajo es aproximar una magnitud del nivel de informalidad de la economía que permita una mejor toma de decisiones de política pública en pos de aumentar la base de tributación, reducir la carga fiscal sobre el sector formal de la economía y acompañar en la transición hacia la formalidad. A diferencia de la mayoría de la literatura existente, que estima la informalidad laboral, el trabajo se centra en la informalidad tributaria y aporta una nueva metodología de estimación con un enfoque más cercano a la práctica tributaria. Además, el trabajo aporta como novedad resultados a nivel sectorial y por tamaño de los contribuyentes. Para esto, se utilizan los anuarios estadísticos de AFIP, la base de datos del PIB y la Encuesta Nacional de Grandes Empresas, ambas del INDEC. |
| JEL: | H26 C8 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4715 |
| By: | Michel Pablo |
| Abstract: | La informalidad afecta prácticamente a la mitad de los trabajadores argentinos. El presente estudio se enfoca en entender las enormes diferencias de este registro en los diferentes aglomerados urbanos del país en los últimos 20 años. Nuestros resultados indican que esta variabilidad puede ser explicada en el tiempo por un complemento entre factores estructurales históricos y condicionantes institucionales de la microeconomía. Aunque pasar a la formalidad puede parecerse a la difícil tarea de saltar un acantilado, la evidencia indica que una menor presión tributaria provincial o mayores tasas de terminalidad en la educación secundaria podrían ayudar a disminuir la informalidad laboral en las provincias argentinas en pocos años. |
| JEL: | J0 O4 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4744 |
| By: | Salas Isolda |
| Abstract: | La literatura existente ha abordado ampliamente la temática del retorno de la educación, proponiendose diversas teorías, entre las cuales resalta la Ecuación de Mincer, que sugiere un retorno lineal respecto a todos los años educativos. Sin embargo, en este estudio nos proponemos demostrar la presencia de un retorno diferenciado para los últimos años de cada nivel educativo en Argentina a través de la utilización de regresiones spline, fenómeno al que nos referimos como el “efecto Sheepskin” o “Certificado”. El aporte principal de nuestro trabajo radica en analizar cómo el efecto certificado varía entre los distintos sectores laborales, diferenciando entre el sector público, el sector privado formal, el sector privado informal y los cuentapropistas. Esta diferenciación, que considera las particularidades de cada mercado laboral, es un aspecto que no ha sido considerado en estudios previos. Adicionalmente, nuestro estudio destaca la importancia del contexto familiar en los ingresos salariales de un individuo, explorando variaciones según cada nivel educativo y su culminación. Los resultados revelan que completar un nivel educativo brinda una importante ventaja salarial para empleados del sector público y del sector privado formal, pero esta ventaja no se observa en el sector informal ni entre los cuentapropistas, lo que resalta la importancia de separar los efectos por los distintos sectores en lugar de obtener una tasa de retorno generalizada. Además, la influencia del contexto familiar sobre los salarios varía según el nivel educativo alcanzado: en la educación primaria y secundaria, el contexto familiar tiene un impacto positivo significativo, complementando el beneficio de obtener un título. No obstante, para aquellos que completan el nivel universitario, la influencia se reduce considerablemente. |
| JEL: | I2 J3 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4763 |
| By: | Álvarez Kuhnle Tomás |
| Abstract: | Este trabajo busca analizar los efectos que tiene un shock internacional sobre la composición de los mercados de trabajo en países emergentes con alta incidencia de la informalidad. Para ello se toma el sudden stop ocurrido en Argentina comparando los cuartos trimestres de 2017 y 2018. Se utilizan los datos de panel de la EPH para analizar las transiciones y se emplea un modelo logit multinomial para identificar las características personales y del puesto de trabajo que influyen en la probabilidad de cambiar de categoría laboral. Se observa que los empleados en el sector no transable tuvieron una mayor probabilidad de haber cambiado a un trabajo informal, mientras que aquellos que ya estaban en la informalidad era más probable que perdieran su empleo en comparación con los trabajadores en el sector transable. Posteriormente, se utiliza un modelo DSGE que diferencia entre sectores transables y no transables, así como entre empleo formal e informal, para simular el impacto del shock y explicar los hechos estilizados observados. Se encuentra que el modelo base no logra capturar de manera precisa las dinámicas de la relación formal-informal dentro de los sectores transable y no transable. Sin embargo, luego se realizan extensiones en busca de entender cuáles son los supuestos que pueden generar las dinámicas esperadas. |
| JEL: | J46 E27 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4706 |