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Consumers as VAT "evaders": incidence, social bias, and correlates in Colombia

Author

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  • Fergusson, Leopoldo
  • Molina, Carlos
  • Riaño, Juan Felipe

Abstract

Tax evasion lies at the core of the relationship between citizens and the state: it reflects the level of trust in the state and compliance with society’s implicit social contract. However, empirically analyzing tax evasion is challenging, particularly because there are few direct and reliable measures. We conduct list experiments on a large sample of households to estimate how frequently consumers are willing to be complicit in value added tax (VAT) evasion, as well as the extent of social desirability bias in respondent answers. Around 20 percent of respondents agree to make purchases without a receipt in order to avoid paying VAT; surprisingly, they are not ashamed to admit this openly. Evasion is more prevalent in places with more informality and less physical presence of the state, as well as among poorer, less educated individuals and those who disregard the rule of law.

Suggested Citation

  • Fergusson, Leopoldo & Molina, Carlos & Riaño, Juan Felipe, 2019. "Consumers as VAT "evaders": incidence, social bias, and correlates in Colombia," LSE Research Online Documents on Economics 123049, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:123049
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    File URL: http://eprints.lse.ac.uk/123049/
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    Cited by:

    1. Diana Ricciulli-Marín, 2020. "The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia," Cuadernos de Historia Económica 53, Banco de la Republica de Colombia.
    2. Leopoldo Fergusson & Carlos A. Molina & James A. Robinson, 2022. "The Weak State Trap," Economica, London School of Economics and Political Science, vol. 89(354), pages 293-331, April.
    3. Burgstaller, Lilith & Feld, Lars P. & Pfeil, Katharina, 2022. "Working in the shadow: Survey techniques for measuring and explaining undeclared work," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 661-671.
    4. Leopoldo Fergusson, 2019. "Who wants violence? The political economy of conflict and state building in Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 38(78), pages 671-700, November.
    5. Diana Ricciulli, 2020. "The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia," Documentos CEDE 18537, Universidad de los Andes, Facultad de Economía, CEDE.

    More about this item

    Keywords

    tax evasion; value added tax; social desirability bias; list experiments;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General

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