Leo Czajka
(IRES/LIDAM)
will give a presentation on
Using third-party data to improve tax compliance in a context of low enforcement
Abstract: This paper investigates a potentially cost-effective way to improve tax compliance when enforcement capacity is low, by leveraging inter-firm relationships and third-party reporting by the largest firms. We randomize a low-cost communication intervention which induces the largest firms to better comply with a policy whereby they must yearly provide the list of all payments made to their suppliers, indicating the suppliers’ fiscal identifier, or the amount of 5% tax withheld from those which are not registered. Following the intervention, we show that treated firms submit more complete information about their suppliers. This information can subsequently be exploited to identify potentially under-reporting taxpayers and large informal firms. Targeted firms also declare more withholding tax although early results on the actual payments suggest that part of the newly declared amounts had already been paid for.