Productivity and Tax Evasion

By Era Dabla-Norris, Mark Gradstein, Fedor Miryugin, Florian Misch

November 27, 2019

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Era Dabla-Norris, Mark Gradstein, Fedor Miryugin, and Florian Misch. Productivity and Tax Evasion, (USA: International Monetary Fund, 2019) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The extent of tax compliance has important implications for revenue yield, efficiency and the fairness of any tax system. Tax evasion undermines revenue collection, distorts competition, and undermines a country’s development prospects. In this paper, we investigate whether higher productivity causally leads to lower tax evasion. We first present stylized facts consistent with this view and develop a model that illustrates one potential transmission channel. Second, we test the model predictions at the firm level using the self-reported share of declared income as proxy for tax evasion for a large sample of emerging and developing economies. Our results suggests that productivity improvements by firms can lead to lower tax evasion.

Subject: Labor productivity, Production, Productivity, Revenue administration, Tax administration core functions, Tax evasion, Tax return filing compliance

Keywords: Central and Eastern Europe, Central Asia, East Africa, Firm, Firm level, Firm productivity, Labor productivity, Middle East, North Africa, Productivity, Productivity indicator, Productivity result, Tax administration core functions, Tax evasion, Tax evasion propensity, Tax return filing compliance, Tax-evading firm, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/260
Stock No:

WPIEA2019260
ISBN:

9781513518619
ISSN:

1018-5941

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