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on Informal and Underground Economics |
| By: | Keshav Choudhary; Bhanu Gupta |
| Abstract: | Traditional tax audits are effective at raising revenue but are costly to scale. Can third-party auditors enhance compliance, or are they prone to collusion due to inherent conflicts of interest? We study a policy reform in India that introduced unanticipated changes in the revenue threshold for mandatory third-party audits. Using a combination of bunching and difference-in-differences methods on administrative data, we estimate that third-party audits can increase tax payments by around 45%, on average. However, firms with income or expenses already subject to third-party reporting exhibit smaller responses to private audits, reflecting a lower scope for manipulation. Our findings suggest that extending third-party audit requirements to smaller firms below the current threshold may be a cost-effective approach to increasing compliance in low state capacity settings. |
| Keywords: | Third-party audit, Corporate tax, Evasion, Bunching |
| JEL: | H26 H32 M42 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2025-04 |
| By: | Ana Luiza Nabuco (Cedeplar/UFMG and EHESS); Luiza A. Paixão (IBGE); Marcelo de B. Brandão (consultor independente); Renan P. Almeira (Cedeplar/UFMG) |
| Abstract: | This article presents a pioneering estimate of tax evasion on residential rental income in Brazil. The topic gains importance amid transformations in real estate markets and the global rise in families living in rented homes. Results are based on the cross-referencing of three databases: unprecedented access to Federal Revenue records (DIMOB), the Demographic Census, and the Family Budget Survey (POF). Tax evasion is measured through two indicators: tax evasion and contractual informality, both showing extremely high levels in terms of the number of rentals and the value of income. Strong regional heterogeneity is observed, with higher rates in capitals of the North, Northeast, and Central-West regions and in the country’s interior. In capitals alone, about 3.7 million rental properties are not reported to tax authorities. These findings raise important debates on income and property inequality, given the concentration of rental income among high-income groups and the significant share of rent payments made by low-income households. The potential for additional tax revenue is considerable: undeclared rental income is estimated between R$65 and R$215 billion annually. Informal rentals thus represent the prevailing pattern in Brazil, revealing a significant and often overlooked dimension of the informal economy. |
| Keywords: | tax evasion, taxation, rent, real estate market, informality |
| JEL: | H2 H24 H26 R21 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cdp:texdis:td687 |
| By: | Jörgen Levin; Emmanuel Orkoh |
| Abstract: | Determining the optimal tax burden that maximizes compliance and revenue remains a major challenge in developing countries, partly due to the literature's focus on linear tax-compliance relationships. Using firm-level data from Ghana and an instrumental variable approach, this paper finds a nonlinear relationship: compliance rises with higher taxes up to a threshold of 45%, beyond which it declines. This threshold, more than double the average tax burden of 21%, varies by firm size and formality—medium-large firms (30%), micro (46%), small (49%), formal (41%), and semi-formal (46%). |
| Keywords: | Taxation, Tax compliance, Tax evasion, Ghana |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-91 |
| By: | Guylaine Nouwoue; Marc Ateba; Miguel A. Fonseca; Jannesquin Royer |
| Abstract: | We explore how instructing future taxpayers on basic tax information helps build a tax-paying culture under low state capacity. We embedded a randomized survey experiment in a large tax awareness campaign directed towards young adults in Cameroon. We randomly assigned 1, 962 public and private secondary school students from 42 classes to tax information classes. We provide causal evidence of significant effects on basic tax knowledge and compliance attitudes with differential treatment effects across gender, risk attitudes, and family backgrounds. |
| Keywords: | Tax compliance, Tax morale, Social norms, Tax evasion, Cameroon |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-84 |
| By: | Ayoki, Milton |
| Abstract: | After the ECOWAS-backed abolition of Nigeria’s premium-motor-spirit (PMS) subsidy in June 2023, the pump-price gap between Nigeria and Niger widened overnight from 0.23 to 0.71 USD litre⁻¹. Using a difference-in-differences design that exploits (i) 400+ border checkpoints (Clingendael 2022 GIS), (ii) 13 241 ACLED road-block events 2020-24, and (iii) monthly NBS price panels 2010-24, we show that jihadist taxation revenue on the Magaria–Jibia corridor increased by 0.9–1.4 USD million per month (≈ 18 % of IS-Sahel’s estimated budget). A structural gravity model calibrated to OECD-SWAC trade elasticities implies that a 0.10 USD litre⁻¹ price gap raises the probability of an Islamist checkpoint by 6.3% (SE 1.7, p |
| Keywords: | Keywords: Fuel subsidy; smuggling; jihadist taxation; Sahel; border checkpoints; difference-in-differences; ECOWAS |
| JEL: | D74 F14 H22 H25 O17 Q34 R41 |
| Date: | 2025–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126590 |