Tax Evasion in Africa and Latin America
This paper examines the impact of the quality of the business environment as well as the monitoring capacity of the tax agency on firms' tax evasion and production decisions. First, the paper uses firm-level data for 30 African and Latin American countries to show that tax evasion and distortions stemming from the business environment are positively and significantly correlated, while sales not reported for tax purposes and institutional quality are negatively and significantly correlated. Second, the paper develops a general equilibrium model where heterogeneous firms make tax evasion decisions based on their assessment of the quality of their business environment as well as the monitoring capacity of the tax agency. The model simulations for each country in the African and Latin American sample show that the model can explain 35 percent of the variation in tax evasion and more than 49 percent of the dispersion in output per worker across the sample countries. Finally, a series of counterfactual experiments shows that, at the current level of deterrence, governments could decrease sales not reported for tax purposes by 21 percent, by reducing distortions stemming from the business environment by half. The paper presents empirical supporting evidence consistent with testable predictions of the model.
| Main Authors: | , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-07
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| Subjects: | TAX EVASION, BUSINESS ENVIRONMENT, INSTITUTIONAL REFORM, PUBLIC SECTOR REFORM, |
| Online Access: | http://documents.worldbank.org/curated/en/937371531333408137/Tax-Evasion-in-Africa-and-Latin-America-the-role-of-distortionary-infrastructures-and-policies https://hdl.handle.net/10986/29995 |
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dig-okr-10986299952024-08-09T07:42:22Z Tax Evasion in Africa and Latin America The Role of Distortionary Infrastructures and Policies Kouame, Wilfried A. Goyette, Jonathan TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM This paper examines the impact of the quality of the business environment as well as the monitoring capacity of the tax agency on firms' tax evasion and production decisions. First, the paper uses firm-level data for 30 African and Latin American countries to show that tax evasion and distortions stemming from the business environment are positively and significantly correlated, while sales not reported for tax purposes and institutional quality are negatively and significantly correlated. Second, the paper develops a general equilibrium model where heterogeneous firms make tax evasion decisions based on their assessment of the quality of their business environment as well as the monitoring capacity of the tax agency. The model simulations for each country in the African and Latin American sample show that the model can explain 35 percent of the variation in tax evasion and more than 49 percent of the dispersion in output per worker across the sample countries. Finally, a series of counterfactual experiments shows that, at the current level of deterrence, governments could decrease sales not reported for tax purposes by 21 percent, by reducing distortions stemming from the business environment by half. The paper presents empirical supporting evidence consistent with testable predictions of the model. 2018-07-16T14:21:10Z 2018-07-16T14:21:10Z 2018-07 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/937371531333408137/Tax-Evasion-in-Africa-and-Latin-America-the-role-of-distortionary-infrastructures-and-policies https://hdl.handle.net/10986/29995 English Policy Research Working Paper;No. 8522 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC |
| institution |
Banco Mundial |
| collection |
DSpace |
| country |
Estados Unidos |
| countrycode |
US |
| component |
Bibliográfico |
| access |
En linea |
| databasecode |
dig-okr |
| tag |
biblioteca |
| region |
America del Norte |
| libraryname |
Biblioteca del Banco Mundial |
| language |
English |
| topic |
TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM |
| spellingShingle |
TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM Kouame, Wilfried A. Goyette, Jonathan Tax Evasion in Africa and Latin America |
| description |
This paper examines the impact of the
quality of the business environment as well as the
monitoring capacity of the tax agency on firms' tax
evasion and production decisions. First, the paper uses
firm-level data for 30 African and Latin American countries
to show that tax evasion and distortions stemming from the
business environment are positively and significantly
correlated, while sales not reported for tax purposes and
institutional quality are negatively and significantly
correlated. Second, the paper develops a general equilibrium
model where heterogeneous firms make tax evasion decisions
based on their assessment of the quality of their business
environment as well as the monitoring capacity of the tax
agency. The model simulations for each country in the
African and Latin American sample show that the model can
explain 35 percent of the variation in tax evasion and more
than 49 percent of the dispersion in output per worker
across the sample countries. Finally, a series of
counterfactual experiments shows that, at the current level
of deterrence, governments could decrease sales not reported
for tax purposes by 21 percent, by reducing distortions
stemming from the business environment by half. The paper
presents empirical supporting evidence consistent with
testable predictions of the model. |
| format |
Working Paper |
| topic_facet |
TAX EVASION BUSINESS ENVIRONMENT INSTITUTIONAL REFORM PUBLIC SECTOR REFORM |
| author |
Kouame, Wilfried A. Goyette, Jonathan |
| author_facet |
Kouame, Wilfried A. Goyette, Jonathan |
| author_sort |
Kouame, Wilfried A. |
| title |
Tax Evasion in Africa and Latin America |
| title_short |
Tax Evasion in Africa and Latin America |
| title_full |
Tax Evasion in Africa and Latin America |
| title_fullStr |
Tax Evasion in Africa and Latin America |
| title_full_unstemmed |
Tax Evasion in Africa and Latin America |
| title_sort |
tax evasion in africa and latin america |
| publisher |
World Bank, Washington, DC |
| publishDate |
2018-07 |
| url |
http://documents.worldbank.org/curated/en/937371531333408137/Tax-Evasion-in-Africa-and-Latin-America-the-role-of-distortionary-infrastructures-and-policies https://hdl.handle.net/10986/29995 |
| work_keys_str_mv |
AT kouamewilfrieda taxevasioninafricaandlatinamerica AT goyettejonathan taxevasioninafricaandlatinamerica AT kouamewilfrieda theroleofdistortionaryinfrastructuresandpolicies AT goyettejonathan theroleofdistortionaryinfrastructuresandpolicies |
| _version_ |
1807158321824661504 |