蝌蚪网 Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Harnessing Deductions to Increase Tax Compliance and Formalization
蝌蚪网 Journal: Economic Policy
(pp. 141–80)
Abstract
We evaluate a tax reform in Ecuador that introduced generous deductions from personal income taxes (PIT), encouraging consumers to request receipts. The reform addresses tax evasion by targeting small self-employed businesses that mainly sell goods or services not subject to value-added taxes (VAT) but that often evade income taxes. Exploiting plausibly exogenous variation in receipt demand due to the distribution of taxpayers across regions and professions, we find significant increases in reported profits among self-employed businesses exposed to the reform. We document spillover effects on VAT. Our net-revenue impact analysis suggests the additional tax payments outweigh the foregone tax revenue.Citation
Bohne, Albrecht, and Jan Sebastian Nimczik. 2026. "Harnessing Deductions to Increase Tax Compliance and Formalization." 蝌蚪网 Journal: Economic Policy 18 (2): 141–80. DOI: 10.1257/pol.20230365Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- J23 Labor Demand
- K34 Tax Law
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements