Casting the Tax Net Wider : Experimental Evidence from Costa Rica
The majority of firms in developing countries are informal, and encouraging them to register with the tax authority has proven challenging and costly. This paper argues that incomplete tax filing among registered firms constitutes an important inte...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/10/26843269/casting-tax-net-wider-experimental-evidence-costa-rica http://hdl.handle.net/10986/25167 |
| Summary: | The majority of firms in developing
countries are informal, and encouraging them to register
with the tax authority has proven challenging and costly.
This paper argues that incomplete tax filing among
registered firms constitutes an important intermediate form
of informality, which can be tackled with much higher
cost-effectiveness. Using a nationwide randomized experiment
in Costa Rica, The paper shows that credible enforcement
emails tripled the income tax filing rate and doubled the
payment rate among previously non-filing firms. The
treatment effect was even higher when the email listed
examples of third-party reports of a firm's
transactions, with the return on an email reaching US$ 19.
It also shows that the intervention had no negative
spillovers on other tax compliance dimensions, the treatment
effects persisted in the medium term, and treated firms
became more likely to file information reports about their
suppliers or clients, thereby increasing the tax
authorities' information set for future tax enforcement. |
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