Consumers as Tax Auditors
- American Economic Review (Forthcoming)
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 that aids consumers to whistle-blow firms in Sao Paulo, Brazil (Nota Fiscal Paulista). Firms reported sales increased by at least 21 percent over four 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.
Forthcoming Article Downloads