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Corporate Taxation and Evasion Responses: Evidence from a Minimum Tax in Honduras

Author

Listed:
  • Felipe Lobel
  • Thiago Scot
  • Pedro Zúniga

Abstract

We study corporate responses to a minimum income tax, using the universe of corporate tax filings in Honduras. The policy design allows us to separately estimate cost misreporting under profit taxation and the elasticity of reported revenue. Large corporations overreport true costs when taxed on profits. Taxing revenue leads to a substantial decrease in reported revenues: we estimate an elasticity in the range 0.35–1. The elasticity of revenue is attenuated when third-party information on the revenue of firms is available, suggesting misreporting plays an important role. Our results inform trade-offs when broadening tax bases to curb evasion.

Suggested Citation

  • Felipe Lobel & Thiago Scot & Pedro Zúniga, 2024. "Corporate Taxation and Evasion Responses: Evidence from a Minimum Tax in Honduras," American Economic Journal: Economic Policy, American Economic Association, vol. 16(1), pages 482-517, February.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:1:p:482-517
    DOI: 10.1257/pol.20210587
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    Cited by:

    1. Irene Di Marzio & Sauro Mocetti & Enrico Rubolino, 2024. "The market externalities of tax evasion," Temi di discussione (Economic working papers) 1467, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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