Public Finance in the Era of the COVID-19 Crisis
18-20 August 2021 | Online, Organized by University of Iceland, Reykjavík
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Please note that all times are shown in the time zone of the conference. The current conference time is: 2nd Dec 2021, 01:37:16pm GMT
E06: Tax Evasion
12:30pm - 12:52pm
Tax Policies Design in a Hierarchical Two-Side Model with Occupational Decision
Pontificia Universidad Católica de Chile, Chile
This study incorporates the occupational decision, i.e. dependent and self-employed, into the hierarchical model of Sanchez and Sobel (1993) to investigate distortions in tax policies design. The optimal audit shows that audits are efficient below a cut-off level, and above this level, audits are equal to zero. The marginal tax rate is smaller than one, indicating that not considering occupational decisions produces an upward bias on taxes. The optimal IRS's budget does not allow auditing the entire self-employed sector but it is larger than the result from a cost-benefit analysis. Finally, differential taxation is optimal if the marginal tax rate in the self-employed sector is higher than the dependent sector. This result produces that the distortions in the optimal allocation of agents increase in comparison with an environment with only one marginal tax rate.
12:52pm - 1:15pm
The Effect of Audit Threats and Moral Appeals on Tax Compliance of Small Firms: Evidence from a Randomized Experiment in Bulgaria
1University of Mannheim, Germany; 2University of Nijmegen, Netherlands
We study tax compliance and enforcement of VAT and SSCs in a field experiment with SMEs in Bulgaria. By randomly allocating treatment mailings to taxpayers, the effectiveness of audit-threats and tax morale in raising tax compliance is investigated. A special interest lies on evaluating whether businesses react to moral appeals from the tax authority. Preliminary results suggest that the treatments are especially successful in raising compliance with SSCs among firms. The results show that both audit-threats and moral appeals are effective in increasing subsequent SSC reporting.
1:15pm - 1:37pm
Does Shaming Pay?: Evaluating California’s Top 500 Tax Delinquent Publication Program
1California Franchise Tax Board; 2Georgetown University, United States of America; 3University of Michigan
We present new evidence on the impact of shaming on tax compliance, drawing on non-public administrative data from the world’s fifth-largest economy. Taxpayers notified that they will be publicly identified as one of the jurisdiction's largest tax debtors respond dramatically to treatment, with large and significant changes in extensive-margin behaviors such as entering into a payment agreement. Intensive-margin effects are smaller, suggesting that liquidity constraints may explain a large portion of non-payment. We also explore the effects of professional license suspension on these outcomes.
Our results derive from real-world policy, not an experiment. But by exploiting bright-line cutoffs in treatment eligibility by dollar and ordinal ranking, we are able to argue that observed effects are very likely causal.
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