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Corporate Taxation and Evasion Responses: Evidence from a Minimum Tax in Honduras

  • Felipe Lobel
  • Thiago Scot
  • Pedro Zúniga
American Economic Journal: Economic Policy
vol. 16, no. 1, February 2024
(pp. 482-517)
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Abstract

We study corporate responses to a minimum income tax, using the universe of corporate tax filings in Honduras. The policy design allows us to separately estimate cost misreporting under profit taxation and the elasticity of reported revenue. Large corporations overreport true costs when taxed on profits. Taxing revenue leads to a substantial decrease in reported revenues: we estimate an elasticity in the range 0.35–1. The elasticity of revenue is attenuated when third-party information on the revenue of firms is available, suggesting misreporting plays an important role. Our results inform trade-offs when broadening tax bases to curb evasion.

Citation

Lobel, Felipe, Thiago Scot, and Pedro Zúniga. 2024. "Corporate Taxation and Evasion Responses: Evidence from a Minimum Tax in Honduras." American Economic Journal: Economic Policy, 16 (1): 482-517. DOI: 10.1257/pol.20210587

Additional Materials

JEL Classification

  • H25 Business Taxes and Subsidies including sales and value-added (VAT)
  • H26 Tax Evasion and Avoidance
  • K34 Tax Law
  • 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
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