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IFS-STICERD Public Economics Seminar

Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement

Dina Pomeranz (University of Zurich), joint with Paul Carrillo and Monica Singhal

Wednesday 08 October 2014 12:30 - 13:45

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public. Please ensure you have informed the event contact as early as possible.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


About this event

Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature has argued that the use of third party information to verify taxpayer self-reports is critical for tax enforcement and the growth of state capacity. However, there may be limits to the effectiveness of third party information if taxpayers can make offsetting adjustments on less verifiable margins. We present a simple framework to demonstrate the conditions under which this will occur and provide strong empirical evidence for such behavior by exploiting a natural experiment in Ecuador. We find that when firms are notified by the tax authority about detected revenue discrepancies on previously filed corporate income tax returns, they increase reported revenues, matching the third party estimate when provided. Firms also increase reported costs by 96 cents for every dollar of revenue adjustment, resulting in minor increases in total tax collection.

This seminar series is jointly organized by the IFS and STICERD.

IFS-STICERD Public Economics seminars are held on Wednesdays in term time at 12.30-13.45 IN PERSON at the IFS.

Seminar organisers: Stuart Adam (IFS), Monica Costa Dias (IFS), Xavier Jaravel (LSE), Camille Landais (LSE), Attila Lindner (UCL), Joana Naritomi (LSE), and Johannes Spinnewijn (LSE).

For further information please contact Peter Levell: peter_l@ifs.org.uk .

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