Friday, August 30, 2019
Joana Naritomi (London School of Economics & Political Science), Consumers as Tax Auditors, 109 Amer. Econ. Rev. 3031 (2019):
To investigate the enforcement value of third-party information on potentially collusive taxpayers, I study an anti-tax evasion program that rewards consumers for ensuring that firms report sales and establishes a verification system to aid whistle-blowing consumers in Sao Paulo, Brazil (Nota Fiscal Paulista). Firms reported sales increased by at least 21 percent over 4 years. The results are consistent with fixed costs of concealing collusion, increased detection probability from whistle-blower threats, and with behavioral biases associated with lotteries amplifying the enforcement value of the program.
Although firms increased reported expenses, tax revenue net of rewards increased by 9.3 percent.