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Estimating tax noncompliance among the self-employed—evidence from pleasure boat registers

Author

Listed:
  • Per Engström

    (Uppsala University)

  • Johannes Hagen

    (Uppsala University
    Jönköping University)

  • Edvard Johansson

    (Uppsala University
    Åbo Akademi University)

Abstract

We improve upon the Pissarides-Weber method for estimating tax evasion among the self-employed by utilizing unique register-based consumption measures from the Swedish and Finnish mandatory registers for pleasure boats. This allows for more detailed and statistically powered analyses than survey-based applications. Our results indicate overall levels of hidden incomes that are in line with previous studies. However, the functional form analysis shows that the estimated sizes of underreporting in absolute monetary amounts are almost constant over reported income levels, whereas previous studies have assumed that the underreporting is proportional to income. The results from the preference analysis—in which we compare households that will become self-employed in the near future with households that will remain wage earners—are mixed; the two types of households have insignificant (Finland) or economically small (Sweden) preference differences. However, when we use engine power as a price proxy, the preference differences are larger in both countries.

Suggested Citation

  • Per Engström & Johannes Hagen & Edvard Johansson, 2023. "Estimating tax noncompliance among the self-employed—evidence from pleasure boat registers," Small Business Economics, Springer, vol. 61(4), pages 1747-1771, December.
    • Handle: RePEc:kap:sbusec:v:61:y:2023:i:4:d:10.1007_s11187-023-00749-3
    DOI: 10.1007/s11187-023-00749-3
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    More about this item

    Keywords

    Tax noncompliance; Income underreporting; Self-employment; Pleasure boats; Register data; Engel curve;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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