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...

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Main Authors:	Brockmeyer, Anne, Hernandez, Marco, Kettle, Stewart, Smith, Spencer
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	informality tax evasion firms tax enforcement tax compliance
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

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recordtype	oai_dc
spelling	okr-10986-251672021-04-23T14:04:29Z Casting the Tax Net Wider : Experimental Evidence from Costa Rica Brockmeyer, Anne Hernandez, Marco Kettle, Stewart Smith, Spencer informality tax evasion firms tax enforcement tax compliance 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. 2016-10-17T16:26:07Z 2016-10-17T16:26:07Z 2016-10 Working Paper http://documents.worldbank.org/curated/en/2016/10/26843269/casting-tax-net-wider-experimental-evidence-costa-rica http://hdl.handle.net/10986/25167 English en_US Policy Research Working Paper;No. 7850 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Costa Rica
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	informality tax evasion firms tax enforcement tax compliance
spellingShingle	informality tax evasion firms tax enforcement tax compliance Brockmeyer, Anne Hernandez, Marco Kettle, Stewart Smith, Spencer Casting the Tax Net Wider : Experimental Evidence from Costa Rica
geographic_facet	Latin America & Caribbean Costa Rica
relation	Policy Research Working Paper;No. 7850
description	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.
format	Working Paper
author	Brockmeyer, Anne Hernandez, Marco Kettle, Stewart Smith, Spencer
author_facet	Brockmeyer, Anne Hernandez, Marco Kettle, Stewart Smith, Spencer
author_sort	Brockmeyer, Anne
title	Casting the Tax Net Wider : Experimental Evidence from Costa Rica
title_short	Casting the Tax Net Wider : Experimental Evidence from Costa Rica
title_full	Casting the Tax Net Wider : Experimental Evidence from Costa Rica
title_fullStr	Casting the Tax Net Wider : Experimental Evidence from Costa Rica
title_full_unstemmed	Casting the Tax Net Wider : Experimental Evidence from Costa Rica
title_sort	casting the tax net wider : experimental evidence from costa rica
publisher	World Bank, Washington, DC
publishDate	2016
url	http://documents.worldbank.org/curated/en/2016/10/26843269/casting-tax-net-wider-experimental-evidence-costa-rica http://hdl.handle.net/10986/25167
_version_	1764458722594127872

Casting the Tax Net Wider : Experimental Evidence from Costa Rica

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