Paul L. Caron
Dean


Friday, August 30, 2019

Consumers As Tax Auditors

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.

https://taxprof.typepad.com/taxprof_blog/2019/08/consumers-as-tax-auditors.html

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