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Consumers as tax auditors

Naritomi, Joana (2019) Consumers as tax auditors. American Economic Review. ISSN 0002-8282

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Abstract

To investigate the enforcement value of third-party information on potentially collusive taxpayers, I study an anti-tax evasion program that rewards consumers for ensuring that firms report sales and estab-ishes a verification system to aid whistle-blowing consumers in São Paulo, Brazil (Nota Fiscal Paulista). Firms reported sales increased by at least 21 percent over 4 years. The results are consistent with fixed costs of concealing collusion, increased detection probability from whistle-blower threats, and with behavioral biases associated with lotteries amplifying the enforcement value of the program. Although firms increased reported expenses, tax revenue net of rewards increased by 9.3 percent.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Divisions: International Development
Subjects: H Social Sciences > HJ Public Finance
H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political
Date Deposited: 05 Sep 2019 14:48
Last Modified: 13 Oct 2019 23:09
URI: http://eprints.lse.ac.uk/id/eprint/101538

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