Public Finance in the Era of the COVID-19 Crisis
18-20 August 2021 | Online, Organized by University of Iceland, Reykjavík
Overview and details of the sessions of this online conference.
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Some information on the session logistics:The last speaker of each session is the session chair. The discussant is always the following speaker, with the first speaker being the discussant of the last paper. Each paper has a 22-minutes-block in all sessions. There should be 15 minutes and no more than 18 minutes for the presenter. The discussion is then started by the discussant. Please note that the role of the discussant is different compared to previous years: The discussant has only 1-2 minutes and s/he is not allowed to give a lengthy summary of the paper together with comprehensive comments. Instead, her/his task is to raise one single question/comment and, in doing so, start the general discussion! All participants are asked to be strict in timing to allow people to change sessions during the general discussion. For a (rare) session with less papers in the session than the time slot allows, stick to the congress schedule and use 22 minutes per presentation to allow listeners to smoothly change between sessions. Only registered participants can attend this online conference. Further information available on the congress website https://iipf2021.hi.is/ .
Please note that all times are shown in the time zone of the conference. The current conference time is: 27th Nov 2021, 03:03:55am GMT
4:00pm - 4:22pm
Optimal Taxes And Penalties When The IRS Cannot Commit To Its Audit Policy
1Pontificia Universidad Católica de Chile, Chile; 2CESifo, Germany; 3Universidad Torcuato Di Tella, Argentina; 4CONICET, Argentina; 5CAF Banco de Desarrollo de America Latina, Venezuela
We examine the problem of a utilitarian government that sets taxes and fines for evaders but cannot commit to any enforcement policy. Given the tax law, the government and taxpayers -some of whom are honest-play a report-audit game that, depending on taxes, fines and audit costs, generates either full evasion and no audits, or partial evasion and random auditing. We show that it may be optimal for the government not to fine evaders as a way to commit not to audit. Moreover, social welfare is nonmonotonic in the audit cost.
4:22pm - 4:45pm
The Deterrence Value of Tax Audit: Estimates from a Randomized Audit Program
University of Manchester, United Kingdom
In modern tax systems audit is the sole instrument through which the tax authority can detect noncompliance and create deterrence. We exploit a national program of randomized audits covering the entire population of VAT filers from Pakistan to study how much evasion audit uncovers and how much evasion it prevents by changing behavior. While audit uncovers a substantial amount of evasion (the evasion rate among firms in the bottom three size quartiles is more than 100%), it does not deter future cheating. Examining more than ten intensive and extensive margin outcomes, we detect no effect of audit on proximate or distant firm behavior. Our results suggest audits are suboptimally utilized in checking mechanical violations of law instead of creating deterrence against evasion.
4:45pm - 5:07pm
Taxpayer Self-Inspections, Audits, and Optimal Tax Administration
University of British Columbia, Canada
I document an important tax collection practice previously unknown to tax administration research: mandatory taxpayer self-inspections. The practice emerged spontaneously across China in the 1990s and persists despite having no basis in law. If taxpayers report additional liabilities after self-inspections, no penalties are imposed. Unlike tax amnesties, self-inspections are (i) backed up by the threat of government inspections with a high probability, and (ii) used as a routine revenue-generation technique. Self-inspections represent 50% of the activity in China’s “tax inspection” system and assume even greater importance in the larger “revenue management” system. They appear much more effective at generating revenue than costlier government inspections.
I offer a conceptual scheme clarifying the relation between self-inspections and other enforcement tools. Self-inspections show that the presumed centrality of audits rests not on its effectiveness in raising revenue, but rather on the importance of the social norm of truthful reporting.
5:07pm - 5:30pm
Do Tax Audits Deter CIT Non-Compliance? Evidence from administrative data
1Tax Administration Research Centre (TARC), University of Exeter - Business School, United Kingdom; 2CESifo; 3Barcelona Institute of Economics (IEB)
What is the impact of risk-targeted tax audits on corporate income tax (CIT) filers’ future reporting behaviour? Do diverse types of examinations lead to different results in terms of their deterrence power? To the best of our knowledge, this is the first paper framed in the developing world addressing these research questions. We find evidence of significant pro-deterrence effect on CIT reporting one year after audit. The effect is lower in magnitude when time passes but not statistically significant and it is completely driven by the change in behaviour of audited taxpayers determined uncompliant. Our results suggest that the type of audit matters. Comprehensive audits drive the aggregate pro-deterrence result while desk-based audits tend to have a counter-deterrent effect after the second year.
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