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Tax Evasion in Africa and Latin America : The Role of Distortionary Infrastructures and Policies / Kouame, Wilfried A.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications")- Format:
- Book
- Government document
- Author/Creator:
- Kouame, Wilfried A.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Business Environment.
- Infrastructure.
- Institutional Reform.
- Law and Development.
- Private Sector Development.
- Public Sector Management.
- Public Sector Reform.
- Tax Evasion.
- Local Subjects:
- Business Environment.
- Infrastructure.
- Institutional Reform.
- Law and Development.
- Private Sector Development.
- Public Sector Management.
- Public Sector Reform.
- Tax Evasion.
- Physical Description:
- 1 online resource (48 pages)
- Other Title:
- Tax Evasion in Africa and Latin America
- Place of Publication:
- Washington, D.C. : The World Bank, 2018.
- System Details:
- data file
- Summary:
- This paper examines the impact of the quality of the business environment as well as the monitoring capacity of the tax agency on firms' tax evasion and production decisions. First, the paper uses firm-level data for 30 African and Latin American countries to show that tax evasion and distortions stemming from the business environment are positively and significantly correlated, while sales not reported for tax purposes and institutional quality are negatively and significantly correlated. Second, the paper develops a general equilibrium model where heterogeneous firms make tax evasion decisions based on their assessment of the quality of their business environment as well as the monitoring capacity of the tax agency. The model simulations for each country in the African and Latin American sample show that the model can explain 35 percent of the variation in tax evasion and more than 49 percent of the dispersion in output per worker across the sample countries. Finally, a series of counterfactual experiments shows that, at the current level of deterrence, governments could decrease sales not reported for tax purposes by 21 percent, by reducing distortions stemming from the business environment by half. The paper presents empirical supporting evidence consistent with testable predictions of the model.
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