Are Innovating Firms Victims or Perpetrators? Tax Evasion, Bribe Payments, and the Role of External Finance in Developing Countries

This paper investigates corruption and tax evasion and their firm-level determinants across 25,000 firms in 57 countries, a large fraction of which are small and medium enterprises in developing countries. Firms that pay more bribes also evade more taxes. Corruption acts as a tax on innovation, particularly that of small and young firms. Innovating firms pay a larger percentage of their revenues in bribes to government officials than non-innovating firms. They do not, however, pay more protection money to private parties than other firms. Comparing the magnitudes of bribes and taxes evaded, innovating firms and firms that use formal finance are more likely to be net victims. The findings point to the challenges facing innovators in developing countries and the role of banks in curbing corruption and tax evasion.

Bibliographic Details

Main Authors:	Ayyagari, Meghana, Demirgüç-Kunt, Asli, Maksimovic, Vojislav
Format:	Policy Research Working Paper biblioteca
Language:	English
Published:	2010-07-01
Subjects:	ACCESS TO CREDIT, AGENCY PROBLEM, ANTI-CORRUPTION, ANTICORRUPTION, ASSETS, ASYMMETRIC INFORMATION, BANK ACCESS, BANK FINANCING, BANK LOAN, BANK POLICY, BANKING SECTOR, BANKS, BIASES, BORROWING, BRIBE, BRIBERY, BRIBES, BRIBING, BUSINESS ACTIVITIES, BUSINESS ASSOCIATIONS, BUSINESS PEOPLE, CHAMBERS OF COMMERCE, CHECKS, CONFIDENCE, COOPERATIVES, CORPORATE FINANCE, CORPORATE GOVERNANCE, CORPORATE TAX, CORPORATE TAX RATES, CORPORATE TAXES, CORRUPT, CORRUPT OFFICIAL, CORRUPT OFFICIALS, CORRUPTION, CORRUPTION ACTS, CORRUPTION PERCEPTION, CORRUPTION PERCEPTION INDEX, CREDIBILITY, CREDITORS, CRIME, CRIMINAL, CRIMINALS, DEBT, DEBT STRUCTURE, DEVELOPING COUNTRIES, DEVELOPMENT FINANCE, DISPUTE RESOLUTION, DUMMY VARIABLE, DUMMY VARIABLES, EARNINGS, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, EDUCATION LEVEL, ELECTRICITY, EMERGING MARKETS, ENTERPRISE PERFORMANCE, ENTREPRENEUR, ENTREPRENEURS, EQUIPMENT, EXCHANGE RATE, EXPENDITURES, EXPORTER, EXPORTERS, EXTERNAL FINANCE, EXTERNAL FINANCING, EXTORTION, FINANCIAL DEVELOPMENT, FINANCIAL INSTITUTIONS, FINANCIAL INTERMEDIARIES, FINANCIAL INTERMEDIATION, FINANCIAL SECTOR REFORM, FINANCIAL SYSTEM, FIRM PERFORMANCE, FOREIGN FIRMS, FORMAL BANK, FORMAL ECONOMY, FORMAL FINANCE, GIFTS, GOVERNANCE ISSUES, GOVERNMENT CORRUPTION, GOVERNMENT OFFICIALS, GOVERNMENT REGULATION, GOVERNMENT REGULATIONS, IDS, INCOME CATEGORIES, INCOME GROUP, INCOME LEVELS, INFORMAL FINANCE, INFORMAL FINANCING, INITIATIVE, INSTRUMENT, INTERNATIONAL BANK, INVESTMENT CLIMATE, INVESTMENT FUND, JUSTICE, LAWS, LEGAL CONSTRAINTS, LEVEL PLAYING FIELD, LICENSES, LOAN, MARGINAL TAX RATES, MONEYLENDER, OBSTACLES TO GROWTH, OPERATING COSTS, OPTIMAL DEBT STRUCTURE, OVERDRAFT, OVERDRAFT FACILITY, OWNERSHIP STRUCTURE, OWNERSHIP STRUCTURES, PERSONAL GAIN, POLICE, POLITICAL CORRUPTION, POLITICAL ECONOMY, POLITICIANS, PRIVATE CREDIT, PRIVATE GAIN, PRIVATE PARTIES, PRIVATE SECTOR, PROFIT MARGIN, PROFIT MARGINS, PROFITABILITY, PROPERTY RIGHTS, PROPRIETORSHIPS, PUBLIC, PUBLIC ECONOMICS, PUBLIC FINANCE, PUBLIC FINANCES, PUBLIC OFFICIALS, PUBLIC SECTOR, PUBLIC SECTOR REFORM, REFORM PROGRAMS, REINVESTMENT, REINVESTMENT RATES, REVENUE COLLECTION, SALES GROWTH, SALES REVENUE, SELF-FINANCE, SHADOW ECONOMY, SHAREHOLDERS, SOCIAL CAPITAL, SOCIAL SECURITY, STOCK MARKET, TAX, TAX AVOIDANCE, TAX BURDEN, TAX COLLECTION, TAX COMPLIANCE, TAX EVASION, TAX RATES, TAX REGULATION, TAX REPORTING, TAXATION, TAXPAYER COMPLIANCE, TAXPAYERS, TELEPHONE LINE, THEFT, TRANSACTION, TRANSITION COUNTRIES, TRANSITION ECONOMIES, TRANSPARENCY, VIOLENCE, WORKING CAPITAL,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100729092336 http://hdl.handle.net/10986/3873
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