Targeting Tax Enforcement Efforts on Larger Firms : A Necessary Distortion?
To collect tax revenue and maximize the use of scarce enforcement capacity, some tax administrations focus their enforcement efforts disproportionately on large firms instead of enforcing taxes evenly on firms of all sizes: small, medium, or large....
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| Format: | Brief |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/639901616767373603/Targeting-Tax-Enforcement-Efforts-on-Larger-Firms-A-Necessary-Distortion http://hdl.handle.net/10986/35336 |
| Summary: | To collect tax revenue and maximize the
use of scarce enforcement capacity, some tax administrations
focus their enforcement efforts disproportionately on large
firms instead of enforcing taxes evenly on firms of all
sizes: small, medium, or large. This Research & Policy
Brief provides evidence that size-dependent tax enforcement
is prevalent, especially in lower-income countries, leading
to increasing effective tax rates as firms become larger.
The Brief then quantifies the impact of this policy for
aggregate economic production. It finds that the impacts are
moderate (amounting to about a 1 percent decline in total
factor productivity), and thus could be justified for tax
authorities with limited resources, given documented tax
revenue gains of stringent enforcement targeted to large firms. |
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