The value of honesty: empirical estimates from the case of the missing children

How much are people willing to forego to be honest, to follow the rules? When people do break the rules, what can standard data sources tell us about their behavior? Standard economic models of crime typically assume that individuals are indifferent to dishonesty, so that they will cheat or lie as long as the expected pecuniary benefits exceed the expected costs of being caught and punished. We investigate this presumption by studying the response to a change in tax reporting rules that made it much more difficult for taxpayers to evade taxes by inappropriately claiming additional dependents. The policy reform induced a substantial reduction in the number of dependents claimed, which indicates that many filers had been cheating before the reform. Yet, the number of filers who availed themselves of this evasion opportunity is dwarfed by the number of filers who passed up substantial tax savings by not claiming extra dependents. By declining the opportunity to cheat, these taxpayers reveal information about their willingness to pay to be honest. In our analysis, we develop a novel method for inferring the characteristics of taxpayers in the absence of audit data. Our findings indicate both that this willingness to pay to be honest is large on average and that it varies significantly across the population of taxpayers.     

The relation between national cultural dimensions and tax evasion

Although penalties and audits exist, tax evasion is a widespread phenomenon and continues to be a problem for many countries. National culture may contribute to a further understanding of intentional noncompliance across countries. In this study, we investigate the influence of national culture on tax compliance levels across 50 countries. Using Hofstede's (1980) cultural framework as a basis for our hypotheses, we find that a noncompliant country's profile is characterized by high uncertainty avoidance, low individualism, low masculinity, and high power distance. Our results have implications for both research and practice. This is the first study to employ Hofstede's cultural framework as an explanator of international tax compliance diversity and serves as the starting point for the development of an international tax compliance framework. Tax policy implications also are addressed.     

The effects of International Financial Reporting Standards,auditing and legal enforcement on tax evasion: Evidence from 37 African countries

This study examines the significance of International Financial Reporting Standards (IFRS), audting and legal enforcement on tax evasion for a group of 37 African countries for the period 2008–2017. These countries were subsequently regrouped into subsamples of four clusters. Three-stage least square regression was used for the analysis. The results indicate that there is a negative and significant relationship between IFRS and tax evasion in some clusters (i.e., early IFRS adopters and strong legal enforcers). The other clusters (late IFRS adopters and weak legal enforcers) have a similar sign of coefficient though statistically insignificant. Moreover, evidence suggests that adoption and application of IFRS lead to improved financial reporting quality and lessen tax evasion in some African jurisdictions. Additionally, legal enforcement is found to be statistically significant in relation to tax evasion in two clusters (i.e., early IFRS adopters and strong legal enforcers). Some African countries are slow or ineffective in adopting and implementing IFRS, which by itself cannot improve tax compliance. IFRS can only achieve its objective when there is strong legal enforcement (e.g., control of corruption, rule of law, effective regulatory framework, voice and accountability, strong monitoring, and auditing to promote transparency). More evidently, in contrast to weak legal enforcers, countries with strong legal enforcement have high IFRS compliance, which can strengthen auditing and reporting standards and hence, improve tax compliance.     

The Distributional Implications of Income Under‐Reporting in Hungary*

The ability and inclination of specific social groups to evade tax vary widely, and this leads to considerable variation in the actual tax burden on individuals with similar levels of income. Thus, ignoring tax evasion can be seriously misleading in terms of the distributive and fiscal effects of the tax system. This paper estimates the distributional implications of income tax evasion in Hungary, based on a random sample of the administrative tax records of nearly 230,000 individuals. Gross incomes declared in the administrative tax returns are compared with incomes stated in a nationally representative household budget survey. Our estimates show that the average rate of underreporting is 9–13 per cent, though this conceals a big difference between the self‐employed (who hide the greater part of their income) and employees. The estimates are likely to be lower bounds. These rates are used in a tax– benefit microsimulation model to calculate the fiscal and distributional implications of under‐reporting. Tax evasion reduces households' personal income tax payments by about 16–20 per cent. While the poverty rate increases only slightly, income inequality rises significantly, suggesting that high‐income households tend to evade tax proportionately more. Finally, we find that tax evasion largely reduces the progressivity of the tax system.     

逃税规模的衡量

逃税造成了政府财政收入的减少,因而政府理所当然地关心社会中的逃税程度,而且逃税程度的大小也代表了一国税务机关税收征管成效的高低.因此从这个意义上讲,对逃税规模的衡量就显得必要了.不过,由于纳税人的逃税行为是隐蔽的,故很难对逃税规模进行直接有效的衡量,尽管如此,还是存在一些方法从侧面去测算一国的逃税规模的.     

Fighting Tax Evasion by Discouraging the Use of Cash?

We propose a bargaining model of tax evasion with a seller that offers a price discount to a buyer in exchange for a cash payment without a receipt, which allows tax evasion. We study the effect on evasion and government revenue of two policy instruments: a tax on cash withdrawals (TCW), which imposes a cost on the buyers who pay cash, and a tax rebate conditional on having the receipt. The tax rebate reduces evasion but it is costly if tax evasion is low. The TCW reduces evasion only if it is set at a sufficiently high rate, which must be higher the larger is the mass of cash users. We also show that the implementation of a TCW, which poses several challenges, is easier if the cost of cash hoarding is high.     

结合逃税的最优税收理论研究评述

最优税收理论主要研究税制的最优设计问题,而逃税理论主要致力于政府的最优执行问题,最近出现了将这两种理论结合起来的研究趋势。结合逃税的最优税收理论,包括最优所得税和最优商品税等内容,研究结果表明:结合逃税的最优税收理论并不能得出比标准最优税收理论更为明确的政策结论,其还有待于进一步的研究和发展。     

Transparency and Tax Evasion: Evidence from the Foreign Account Tax Compliance Act (FATCA)

We examine how U.S. individuals respond to regulation intended to reduce offshore tax evasion. The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report information to the U.S. government regarding U.S. account holders. We first document an average $7.8 billion to $15.3 billion decrease in equity foreign portfolio investment to the United States from tax-haven countries after FATCA implementation, consistent with a decrease in “round-tripping” investments attributable to U.S. investors’ offshore tax evasion. When testing total worldwide investment out of financial accounts in tax havens post-FATCA, we find an average decline of $56.6 billion to $78.0 billion. We next provide evidence of other important consequences of this regulation, including increased expatriations of U.S. citizens and greater investment in alternative assets not subject to FATCA reporting, such as residential real estate and artwork. Our study contributes to both the academic literature and policy analysis on regulation, tax evasion, and crime.     

论偷税故意

在税收执法实践中,认定偷税是否应考虑行为人的主观故意性一直是争议最为激烈,且至今没有解决的问题之一。这一问题得不到解决,不但会对纳税人造成不公平,同时也会极大地损害税务机关自身的形象,侵蚀纳税人对税法的遵从度和对税务机关的信赖度。如果从习惯法来理解偷税的故意性,从偷税与偷税罪的关系以及近期国家税务总局一些相关的规范性文件来进行分析,可以拓宽解决这一问题的思路。     

Corporate and personal income tax declarations

Decisions by firms and individuals on the extent of their tax payments have generally been treated as separate choices. Empirically, a positive relationship between corporate and personal income tax evasion can be observed. The theoretical analysis in this paper shows that a manager's decision on the firm's behaviour will be independent of his personal preferences if the gain from reducing corporate tax payments is certain, as in the case of tax avoidance. If, however, the firm evades taxes so that the manager's income depends on whether the firm's activities are detected or not, corporate and personal income tax evasion choices cannot be separated. Jel Code H 24 · H 25 · H 26     

Tax evasion in a Cournot oligopoly with endogenous entry

If an additional competitor reduces output per firm in a homogenous Cournot oligopoly, market entry will be excessive. Taxes can correct the so-called business stealing externality. We investigate how evading a tax on operating profits affects the excessive entry prediction. Tax evasion raises the number of firms in market equilibrium and can alter their welfare-maximising number. In consequence, evasion can aggravate or mitigate excessive entry. Which of these outcomes prevails is determined by the direct welfare consequences of tax evasion and the relationship between evasion and the tax base. We also determine conditions which imply that overall welfare declines with tax evasion.     

电子商务环境下的国际逃税与避税

由于电子商务的迅速发展和各国税收立法的相对滞后,电子商务逃、避税问题日益突出。各国根据电子商务环境下的国际逃、避税的新特点,在原有防范措施的基础上,采取了一些新的措施,如加强税务机关自身信息化建设、提高网络技术、推行电子商务税收登记制度、从支付体系入手解决电子商务税收的征管问题,加强国际间的交流与合作等。     

Tax Evasion, Risky Laundering, and Optimal Deterrence Policy

This paper extends the Allingham and Sandmo's (1972) model of income tax evasion to take account of laundering opportunities, allowing the taxpayer to determine not only the amount of actual income to declare but also the amount of undeclared income to launder. Laundering, aside of entailing direct costs, is assumed to be an unlawful activity, subject to the risk of detection and punishment. The tax authorities devote separate resource efforts to initial audits which may detect undeclared income that has not been laundered and to in-depth investigation which may detect undeclared income that has been laundered. The paper analyzes the effects of laundering incentives on evasion and derives guidelines for the optimal design of a joint evasion/laundering deterrence policy. This revised version was published online in July 2006 with corrections to the Cover Date.     

Evidence of the invisible: toward a credibility revolution in the empirical analysis of tax evasion and the informal economy

Empirical research about tax evasion and the informal economy has exploded in the past few decades, seeking to shed light on the magnitude and (especially policy) determinants of these phenomena. Quantitative information informs the analysis of policy choices, enables the testing of hypotheses about determinants of this phenomenon, and can help with the accurate construction of national income accounts. Even as empirical analysis has burgeoned, some have expressed doubts about the quality and usefulness of some prominent measures. The fact that high-quality data is elusive is neither surprising nor a coincidence. The defining characteristic of tax evasion and informal economic activity—that they are generally illegal—often renders unreliable standard data collection methods such as surveys. Unlike invisible phenomena in the natural sciences, these invisible social science phenomena are hard to measure because of choices made by individuals. Analysis of tax evasion and the informal economy must proceed even in the absence of the direct observability of key variables, and theory should guide the construction and interpretation of evidence of the “invisible.” In this paper, we address what can be learned using micro or macro data regarding tax evasion and the informal economy under given conditions and assumptions, and critically review some of the most common empirical methods in light of our conclusions. We conclude with an entreaty for researchers in this field to enlist in the “credibility revolution” (Angrist and Pischke in J. Econ. Perspect. 4(2):3–30, 2010) in applied econometrics.     

The runaway taxpayer

In order to analyze the determinants of tax evasion, the existing literature on individual tax compliance typically takes a ‘prior-to-audit’ point of view. This paper focuses on a ‘post-audit, post-detection’—so far unexplored—framework, by investigating what happens after tax evasion has been discovered and noncompliant taxpayers are asked to pay their debts. We first develop a two-period dynamic model of individual choice, considering an individual that has been already audited and detected as tax evader, who knows that Tax Authorities are looking for her to cash the due amount. We derive the optimal decision of running away in order to avoid paying the bill, and show that the experience of a prior tax notice reduces the probability to behave as a scofflaw. We then exploit information on ‘post-audit, post-detection’ tax compliance provided by an Italian collection agency for the period 2004–2007 to empirically assess the relationship between prior tax notices and unlawful behavior. The evidence from alternative logit model specifications supports our theoretical prediction: successful tax notices are negatively correlated with the probability of running away.     

Re-assessing the merits of measuring tax evasion through business surveys: an application of the crosswise model

Self-assessments by respondents in surveys are often the only available measure of tax evasion in developing countries at the microeconomic level. However, they suffer from the reluctance of respondents to reveal their own illicit behavior. This paper evaluates whether this weakness of self-assessments can at least partially be overcome through a novel questioning method, the crosswise model, which allows estimating the prevalence of tax evasion, but not identifying whether the individual respondent engages in tax evasion or not. Using evidence from Serbia, we show that crosswise model-based estimates of the share of firms which significantly underreport sales exceed those obtained from conventional methods by around 10 % points or more. With respect to wage underreporting to evade payroll tax and social security contributions, we do not find differences. These results appear to be robust to a number of modifications, and we explore various potential causes that lead to these results.     

An evasive topic: theorizing about the hidden economy

This paper reviews some central issues that arise in theorizing about tax evasion decisions and the hidden economy. It starts from the Allingham and Sandmo (J. Public Econ. 1:323–338, 1972) modeling of the tax evasion decision as a choice under uncertainty based on expected utility maximization and risk aversion. It goes on to discuss alternative specifications of the taxpayer’s preferences with particular regard to the explanation of the extensive margin, i.e. the decision on whether or not to engage in tax evasion. It extends the model to the case of variable labor supply with work in both official and black labor markets. It then considers the application of the theory to taxes on wealth and income from capital, indirect tax evasion, and smuggling. It also includes a consideration of general equilibrium effects and of the problems that evasion causes for the theory of optimal income and commodity taxes. It concludes with a brief discussion of the implications of tax evasion for economic policy in the welfare state.     

Collusive tax evasion and social norms

Although collusive tax evasion by buyers and sellers of commodities and also by employers and employees is widespread all over the world, it has rarely been analyzed in the tax evasion literature. To fill this gap and to compare collusive tax evasion with independent tax evasion, this paper develops a simple noncooperative game-theoretic model and confirms the model’s predictions in a laboratory experiment. Because collusive tax evasion involves social interaction, this paper focuses on the effect of social norms and theoretically and empirically demonstrates that the tax compliance norm has a stronger negative effect on the magnitude of collusive tax evasion than on independent tax evasion. The reason for this result is that in a collusive tax evasion game with multiple equilibria social norms affect the range of equilibria and act as an equilibrium selection device, whereas social norms need to be strongly internalized to change the behavior of taxpayers who evade taxes unobservedly.     

An experimental analysis of tax avoidance policies

Policies to reduce aggressive tax avoidance are increasingly being implemented or discussed in many countries around the world. Tax authorities hope that such policies will generate new tax revenue by increasing overall tax compliance. We present an experimental design to investigate the effect of a stylized anti-avoidance tax policy on tax compliance behavior. We highlight that anti-avoidance tax policies that reduce tax avoidance can also induce an increase in tax evasion (“substitution effect”), which limits the additional tax revenue these policies will generate. We show that the degree of substitution depends crucially on behavioral factors such as tax morale. Policymakers therefore also need to consider behavioral features while designing such policies and estimating their potential effects.     

我国税收超额负担：国际比较与优化路径

在我国税收规模连年高速增长,税收负担是否过重热议的背景下,从税收超额负担的视角对各国税收效率进行了比较,并测算了全面减税和对间接税减税两种政策的经济效应。结果表明,中国的税收超额负担处于中等水平,但仍存在减税增效的空间;对间接税减税的结构性减税政策能更好的符合稳物价、调结构的政策目标。