American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Consumers as Tax Auditors
American Economic Review
vol. 109,
no. 9, September 2019
(pp. 3031–72)
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 establishes a verification system to aid whistle-blowing consumers in Sao 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.Citation
Naritomi, Joana. 2019. "Consumers as Tax Auditors." American Economic Review 109 (9): 3031–72. DOI: 10.1257/aer.20160658Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- L25 Firm Performance: Size, Diversification, and Scope
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements