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Identification of Households Prone to Income Underreporting

Author

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  • Merike Kukk
  • Karsten Staehr

Abstract

Pissarides and Weber propose using data on income and food consumption for estimating the extent of income underreporting by the self-employed, a group seen to be prone to income underreporting. This paper is the first to investigate the importance of the way in which these households are identified in such analyses. Using household budget data from Estonia, different ways are used to identify households prone to income underreporting and to estimate the extent of the underreporting. The share of unreported income is estimated to be substantially larger when underreporting households are identified using their share of reported business income than when they are identified using their employment status. Further analysis combines the different identification methods and reveals that the employment status provides no information on underreporting when the share of business income is taken into account. The share of reported business income is the most informative indicator of underreporting.

Suggested Citation

  • Merike Kukk & Karsten Staehr, 2017. "Identification of Households Prone to Income Underreporting," Public Finance Review, , vol. 45(5), pages 599-627, September.
    • Handle: RePEc:sae:pubfin:v:45:y:2017:i:5:p:599-627
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    Citations

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    Cited by:

    1. Fauser, Hannes & Godar, Sarah, 2021. "Income tax noncompliance in Germany, 2001-2014," Discussion Papers 2021/17, Free University Berlin, School of Business & Economics.
    2. Hai Anh La & Duc Anh Dang, 2018. "Income under-reporting and tax evasion: How they impact inequality in Vietnam," WIDER Working Paper Series wp-2018-148, World Institute for Development Economic Research (UNU-WIDER).
    3. Merike Kukk & Alari Paulus & Karsten Staehr, 2020. "Cheating in Europe: underreporting of self-employment income in comparative perspective," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(2), pages 363-390, April.
    4. Daniel Jeong-Dae Lee, 2019. "Cheating the government: does taxpayer perception matter?," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 26(2), pages 1-23, December.
    5. Hai Anh La & Duc Anh Dang, 2018. "Income under-reporting and tax evasion: How they impact inequality in Vietnam," WIDER Working Paper Series 148, World Institute for Development Economic Research (UNU-WIDER).
    6. Ana Cinta G. Cabral & Norman Gemmell & Nazila Alinaghi, 2021. "Are survey-based self-employment income underreporting estimates biased? New evidence from matched register and survey data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(2), pages 284-322, April.

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