|
on Informal and Underground Economics |
| By: | James Alm (Tulane University) |
| Abstract: | In this paper I examine what we have learned about tax evasion, or what might be termed the “knowns” that summarize our increased understanding of tax evasion. I also examine the many “unknowns” that remain unanswered, as well as the many “unknowns” that have newly arisen as technologies have changed. I finish with suggestions about how these “unknowns” might be examined in a new research agenda that builds upon what we have learned but that utilizes new tools that are emerging as our understanding expands. |
| Keywords: | tax evasion, enforcement, social norms, trust, simplification, technology |
| JEL: | H26 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2604 |
| By: | Jay A. Soled (Rutgers Business School); James Alm (Tulane University) |
| Abstract: | “Cash is king” is a long-standing mantra among many businesspeople. It has a less favorable aura in the tax compliance world, where cash is often used to circumvent one’s tax reporting obligations. This analysis explores the current role of cash in today’s economy and suggests reasons why Congress should curtail its use or, at the very least, promote other forms of payment. |
| Keywords: | Tax compliance; tax gap; credit cards; cash; cryptocurrencies; third-party information; nudges |
| JEL: | H2 H26 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2607 |
| By: | James Alm (Tulane University); Jubo Yan (Lingnan College, Sun Yat-sen University); William D. Schulze (Cornell University); Melissa Vigil (Internal Revenue Service); Carrie von Bose (Public Company Auditing Oversight Board) |
| Abstract: | What tax preparer characteristics are most important to taxpayers in their decision to use a tax preparer, and how does this choice of a tax preparer affect subsequent taxpayer compliance? We use laboratory experiments to examine these questions. We find that individuals in this environment simultaneously choose a preparer and their compliance based in part on factors predicted by the standard expected utility theory of individual behavior under uncertainty. However, we find that factors based on psychological considerations –- which we refer to as “behavioral factors” -– also play an important role in this setting: participants prefer tax preparers who are “credentialed, ” even when the cost is high or the credential has no impact on outcomes; participants fear an audit, regardless of its likelihood; participants often choose high-cost preparers even when they are fully compliant; and many participants forego substantial expected earnings rather than underreport income. |
| Keywords: | tax compliance; tax preparer; experimental economics; expected utility theory; behavioral economics |
| JEL: | H2 H26 C91 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tul:wpaper:2606 |
| By: | Rivadeneira, Alex (Banco de Mexico); Canavire Bacarreza, Gustavo (World Bank) |
| Abstract: | This paper studies the long-run intergenerational effects of concertaje, a widespread forced labor system in the Americas from the Spanish colonial era that coerced indigenous workers in rural estates (haciendas) after causing them to become indebted. We collected and digitized the universe of historical individual-level tax records (1800) in what is today Ecuador and connected them to likely descendants using the universe of contemporary (2010s) tax returns and census registries via surnames. We find that descendants from concertaje earn 16 percent less formal labor income vis-Ã -vis descendants from uncoerced indigenous workers. Because of the distortions created by the institution, descendants from concertaje are less educated, more likely to work in agriculture and the informal sector, and less prone to migrate. However, the effects of concertaje on immigrants are milder, suggesting migration acted as a mitigation channel. |
| Keywords: | institutions, persistence, forced labor, intergenerational mobility, Ecuador |
| JEL: | N36 O10 O43 J62 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18614 |
| By: | Martín Leites (IECON-UDELAR, Uruguay and EQUALITAS.); Xavier Ramos (Department of Applied Economics, Universitat Autònoma de Barcelona, Spain; IZA and EQUALITAS.); Cecilia Rodríguez (IECON-UDELAR, Uruguay.); Joan Vilá (IECON-UDELAR, Uruguay.) |
| Abstract: | We contribute to the very incipient literature that estimates the intergenerational mobility of income from large-scale administrative data using high-quality income data and provide novel evidence of intergenerational income mobility in a middle-income country, Uruguay. Our estimates address the important role of informal labor markets, one of the features of low- and middle-income countries, and a major challenge to obtain unbiased estimates of intergenerational mobility in these countries. We estimate an IRA of 0.292, indicating that persistence is higher in Uruguay than in high-income countries, but lower than in the US. Our results show that (i) informal income increases intergenerational persistence, (ii) intergenerational persistence is higher at the upper half of the distribution, especially at the richest decile, and (iii) intergenerational income persistence is largest among parents and children of the same sex. |
| Keywords: | Intergenerational income mobility, Informal labor markets, Uruguay. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:uab:wprdea:wpdea2603 |
| By: | Smuts, Jan; Steenkamp, Daan |
| Abstract: | Trade misinvoicing — the deliberate falsification of volumes, values or classifications of traded goods by at least one party in an international transaction — can undermine the accuracy of trade data, erode a country’s tax base, or facilitate illicit financial flows. South Africa has been flagged as one of the world’s largest sources of illicit financial flows from illicit trade, cross‐border laundering and mineral smuggling. Data availability however makes it difficult to assess this empirically. We compare South Africa’s reported ex‐ port and global counterpart import data to quantify the potential scale of export misinvoicing in South Africa. We show that the data suggest that there has been systematic under‐invoicing of South African commodity exports. However, we also highlight data limitations that constrain accurate assessment of trade misinvoicing. The scale of possible misinvoicing is significant. If taken literally, our findings suggests substantial foregone mineral royalties for the South African fiscus. Our back‐of‐the‐envelope estimates range between R30 to R50 billion for the period 2015‐2024. Our estimates of foregone fiscal revenue suggest that investing in capacity to monitor trade misinvoicing would therefore be self‐funding. |
| Keywords: | trade misinvoicing, tariffs, tax evasion |
| JEL: | F13 F14 F38 H26 |
| Date: | 2026–04–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129014 |
| By: | Hanwei Huang; Yuyuan Yu |
| Abstract: | While import restrictions are increasingly deployed to achieve non-trade objectives such as environmental protection, they often create distortions and leakage through illicit trade. We examine this trade-off in the context of China's waste import ban. Although the policy produced measurable improvements in air and water quality, it also induced significant behavioral responses, including surging evasion via quantity underreporting, heightened smuggling-related criminal activity, and deteriorating performance among affected firms. To quantify the welfare effects, we develop a hybrid sufficient statistic framework that integrates reduced-form evasion elasticities with structural estimates of shadow costs. We find that the environmental gains were more than offset by the costs of smuggling and losses from distortions. |
| Keywords: | Waste, Smuggling, Quota, Pollution, Firm Performance, Sufficient Statistics, Welfare, China |
| Date: | 2026–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2181 |
| By: | Julio López Laborda; Carmen Marín González; Jorge Onrubia |
| Abstract: | El objetivo de este trabajo es presentar una estimación de la brecha fiscal de cumplimiento (compliance gap) del IVA correspondiente a los hogares residentes en España en el año 2022. La brecha se mide como la diferencia entre los ingresos agregados del IVA que se obtendrían en ausencia de fraude (recaudación legal, teórica o ideal) y los ingresos agregados devengados efectivamente (recaudación real) y constituye una aproximación al fraude existente en el impuesto. Queda fuera de esta investigación la estimación de la brecha fiscal de política (policy gap), que cuantifica el coste en términos de recaudación de la existencia de tipos reducidos, exenciones y otros beneficios fiscales. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaeee:eee2026-19 |