No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax / Dina Pomeranz.

Format:

Book

Author/Creator:

Pomeranz, Dina.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19199.

NBER working paper series no. w19199

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

Tax evasion generates billions of dollars of losses in government revenue and creates large distortions, especially in developing countries. Claims that the VAT facilitates tax enforcement by generating paper trails on transactions between firms have contributed to widespread VAT adoption worldwide, but there is little empirical evidence about this mechanism. This paper analyzes the role of third party information for VAT enforcement through two randomized experiments among over 400,000 Chilean firms. Announcing additional monitoring has less impact on transactions that are subject to a paper trail, indicating the paper trail's preventive deterrence effect. Tax enforcement leads to strong spillovers up the VAT chain, increasing compliance by firms' suppliers. These findings confirm that when evasion is taken into account, significant differences emerge between otherwise equivalent forms of taxation.

Notes:

Print version record

July 2013.