Rewarding good taxpayers, an effective mechanism?

In this paper, I examine the conditions under which rewarding honest taxpayers is an optimal mechanism to reduce tax evasion and improve collection. My theoretical model suggests that when it is expensive to audit contributors, and moral (or pecuniary) evasion cost is high enough, rewarding tax comp...

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Autores:
Cabra-Acela, Pedro A.
Tipo de recurso:
Work document
Fecha de publicación:
2021
Institución:
Universidad de los Andes
Repositorio:
Séneca: repositorio Uniandes
Idioma:
eng
OAI Identifier:
oai:repositorio.uniandes.edu.co:1992/50296
Acceso en línea:
http://hdl.handle.net/1992/50296
Palabra clave:
Tax evasion
Good taxpayer
Rewards
Fiscal policy
Argentina
H21, H26, H30
Rights
openAccess
License
http://creativecommons.org/licenses/by-nc-nd/4.0/
Description
Summary:In this paper, I examine the conditions under which rewarding honest taxpayers is an optimal mechanism to reduce tax evasion and improve collection. My theoretical model suggests that when it is expensive to audit contributors, and moral (or pecuniary) evasion cost is high enough, rewarding tax compliance is an effective strategy to increase collection. I provide empirical evidence from Argentina's province variation of rewards policies and tax collection. Where the data suggests that theoretical conditions hold, I find a positive effect in real estate per capita tax collection between 0.4 and more than 2 standard deviations.