Firm-level determinants of tax evasion in transition economies (original) (raw)
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Business Tax Evasion in Transition Economies:A Cross-Country Panel Investigation
2018
This paper uses the Business Environment and Enterprise Performance Survey data for the years 1999, 2002 and 2005 to investigate business tax evasion in 24 transition economies. We use both conventional fixed effects estimation and the recently developed Fixed Effect Vector Decomposition approach. The most robust finding in our study is the importance of institutional factors. In particular, higher levels of corruption related to tax administration and slower transition reforms substantially reduce the amount of taxes paid by businesses in transition economies. In addition, we find a positive relationship between evasion and tax rate; and identify minor effects of the macroeconomic environment. We also find that social norms play a significant role in tax evasion. These findings inform policy recommendations intended to reduce either the possibility and/or the inclination to evade.
THE IMPACT OF CORRUPTION ON FIRM TAX COMPLIANCE IN TRANSITION ECONOMIES: WHOM DO YOU TRUST?
Tax compliance is an important issue for governments and the public alike. To meet public needs and fund public mandates, firms around the world are expected to comply with tax laws. Factors that are related to organizational (firm) tax compliance have not been sufficiently examined in the literature. Due to the increasing global influence of transition economies, factors associated with firm tax compliance in transition economies are particularly of interest. Based on a sample of over 5,000 firms from 22 former Soviet Bloc transition economies, we find that higher levels of corruption and higher levels of particularized trust (reliance on friends and family) are associated with lower levels of tax compliance. Interestingly, we also find that the negative relationship between corruption and tax compliance is weakened in situations of higher generalized trust (trust in strangers). Overall, our study’s results suggest that institutional factors play an important role and are related to firm tax compliance behavior in transition economies.
International Business and Management, 2013
Tax revenues are major and important income sources for governments in most countries. Sufficient tax revenues make many government projects possible and help elected officials and politicians to remain in office longer if the government implements programs and projects demanded by the public. In today’s globalizing economic environments, there is increasing demand for a variety of public services and programs. However, the rate of increase in the tax revenues to finance these public services and programs falls short of the necessary public spending. The potential tax revenue of a country based on its legal or tax law is much larger than the tax revenues that are actually collected. Due to the lack of full tax compliance, government budgets are rarely balanced in most countries, and the gap between revenue and spending is increasing. The main question is why taxpayers evade taxes. To understand tax evasion, one can examine what factors cause taxpayers to evade taxes. If factors that affect tax evasion are identified, policies can be developed to prevent tax evasion. The purpose of this study is to investigate factors related to tax evasion behavior using survey data collected in Turkey. Factor analysis and multiple regression techniques are employed. The results show that taxational and fiscal factors, economic factors, demographic factors, administrative factors, and other factors have statistically significant effects on tax evasion behavior.
Combatting Tax Evasion: Evidence from Comparing Commercial and Business Tax Registry
CESifo: Empirical & Theoretical Models (Topic), 2018
In 2008 and 2014, the South African Revenue Service (SARS) did snapshot synchronizations of its business tax registry with the country’s commercial register in an attempt to identify firms that are non-compliant with their obligation to register with SARS for business tax purposes. We analyse these interventions drawing on SARS’s business tax registry and the population of business tax returns between 2009 and 2014. Several findings emerge. First, in both years, the comparisons resulted in the identification of around 300,000 non-compliant taxpayers, providing prima facie evidence of significant extensive-margin tax evasion. The interventions significantly raised South African business tax revenues in the following years despite the fact that the identi-fied ‘extensive-margin evaders’ exhibit a lower propensity to submit tax returns and, conditional on return submission, report less income than comparable entities that voluntarily registered with SARS. The analysis further suggests ...
Does corruption cause tax evasion? Evidence from an emerging economy
Journal of Money Laundering Control
Purpose The purpose of this study is to examine the corruption-tax evasion nexus and to establish the strength of relationships among corrupting activities. Design/methodology/approach The research applied structural equation modelling on selected data from the World Economic Forum Executive Opinion Survey on corruption activities and data on tax evasion triggering factors from the World Development Indicators and the Bank of Ghana to test two hypotheses. Findings The test of the first hypothesis suggests that corrupting activities significantly cause tax-evading activities in Ghana; hence, there is at least one corrupting activity triggering tax evasion. Testing the second hypothesis revealed that corruption in Ghana exhibits all of the five dimensions of corruption that were examined. Hence, there is correlation among the corrupting activities. Research limitations/implications The research is limited by the availability of data; hence, only data for selected variables for the per...
Bribes and Business Tax Evasion
This paper investigates the role of governance, in particular bribes to tax officials, in shaping business tax compliance behavior in transition economies. The empirical results show that business noncompliance rises with the frequency of tax related bribes. More specifically, the findings from 27 economies suggest that tax evasion thrives when bribes to tax officials are commonplace. These findings are robust to a number of specifications that control for firm and country attributes as well as address the potential endogeneity of bribes.