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on Informal and Underground Economics |
| By: | Dyck, Daniel; Kourouxous, Thomas; Lorenz, Johannes |
| Abstract: | We investigate how tax authorities use joint tax audits as a coordinated enforcement tool in cross-border transactions of a multinational firm. Joint tax audits aim to resolve potential tax disputes early, before such disputes escalate into costly and time-consuming resolution procedures that may not fully eliminate double taxation. Employing a game-theoretic model, we identify settings in which we expect joint audits to occur and investigate their effect on the firm's expected tax payments and tax audit efficiency. We find that the occurrence of joint audits critically depends on the double taxation risk in the absence of joint audits. Unless tax rules are consistently applied, joint audits can occur more often when this risk is higher. The reason is that the firm changes its income-shifting strategy to reduce its expected tax payments, and thereby also enables tax authorities to better target tax disputes via joint audits that would otherwise escalate. However, we identify conditions under which joint audits are then detrimental to tax audit efficiency, particularly when the firm prefers them most. Our results imply that cost-sharing arrangements for joint audits should be tailored to the level of double taxation risk, with firm involvement having the potential to improve efficiency when this risk is high. |
| Keywords: | joint tax audits, double taxation, dispute prevention, income shifting |
| JEL: | H26 H87 F23 M42 C72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:324870 |
| By: | Dong, Sarah (Australian National University); Satyadini, Agung (Australian National University); Sinning, Mathias (Australian National University) |
| Abstract: | Both theory and evidence suggest an ambiguous relationship between business tax compliance and geographic proximity to tax offices. We study this issue using a large-scale natural field experiment with Indonesia’s tax authority involving 12, 000 micro, small, and medium enterprises (MSMEs). Businesses were randomly assigned to receive deterrence, information, or public goods letters, or no message. All letters improved compliance, with deterrence messages producing the largest gains - substantially increasing filing rates and raising monthly tax payments. Each dollar spent on deterrence letters generated about US$30 in additional revenue over the course of a year. We observe high compliance among non-treated MSMEs near metropolitan tax offices and find that enforcement messages successfully raise compliance in non-metropolitan regions to comparable levels. However, targeting already compliant MSMEs near metropolitan tax offices backfires, underscoring the need for geographically tailored tax administration strategies. These results provide novel experimental evidence on the relation between geographic proximity and the effectiveness of tax enforcement, helping to reconcile mixed findings in the tax compliance literature. |
| Keywords: | behavioral insights, natural field experiment, tax compliance |
| JEL: | C93 D90 H25 H26 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18108 |
| By: | Bryce Morsky; Tyler Meadows; Felicia Magpantay; Troy Day |
| Abstract: | The gig economy has grown significantly in recent years, driven by the emergence of various facilitating platforms. Triggering substantial shifts to labour markets across the world, the COVID-19 pandemic has accelerated this growth. To understand the crucial role of such an epidemic on the dynamics of labour markets of both formal and gig economies, we develop and investigate a model that couples disease transmission and a search and match framework of unemployment. We find that epidemics increase gig economy employment at the expense of formal economy employment, and can increase the total long term unemployment. In the short run, large sharp fluctuations in labour market tightness and unemployment can occur, while in the long run, employment is reduced under an endemic disease equilibrium. We analyze a public policies that increase unemployment benefits or provide benefits to gig workers to mitigate these effects, and evaluate their trade-offs in mitigating disease burden and labour market disruptions. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.18377 |
| By: | Carlos Alberto Coca Gamito (Asian Development Bank); Silvia Garcia Mandico (Asian Development Bank) |
| Abstract: | Young people in Bhutan face rising rates of exclusion from employment, education, or training, and limited access to quality jobs, despite gains in education. Entrepreneurship is often viewed as an alternative pathway, but most youth-led ventures remain necessity-driven, informal, and short-lived. Using data from the 2018–2023 Labor Force Survey and the 2024 Jobs and Skills Survey, this paper examines youth entrepreneurship dynamics, including motivations, earnings, productivity, and sectoral patterns. Findings show that opportunity-driven entrepreneurs—especially young women—achieve higher earnings and productivity, but few business ventures by young people transition beyond the early stages. A shift from necessity-driven to opportunity-driven entrepreneurship could yield economic gains equivalent to 1.4% of gross domestic product. Realizing this potential requires gender-responsive, stage-specific support and embedding entrepreneurship within a broader strategy for decent work and inclusive growth. |
| Keywords: | youth employment;entrepreneurship;decent work;gender and labor market;labor market dynamics |
| JEL: | J13 J21 J24 L26 O17 |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021528 |
| By: | Pablo Cotler (Universidad Iberoamericana Mexico City) |
| Abstract: | This study examines the relationship between financial inclusion and the continued use of informal savings in Mexico, using data from three waves of the national financial inclusion survey and instrumental variable techniques. Despite increased account ownership, informal saving practices have not declined. Findings suggest that financial access, infrastructure, and education alone are insufficient to change saving behavior. Policies should consider incorporating features of informal mechanisms, such as rotating savings groups or cooperative models. A deeper understanding of household motivations are needed, and future surveys must capture user experiences to design more inclusive strategies that address persistent financial inequalities. |
| JEL: | D14 G21 O17 |
| Date: | 2025–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:smx:wpaper:2025002 |