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Transaction-tax evasion in the housing market

Author

Listed:
  • José G. Montalvo

    (Universitat Pompeu Fabra-ICREA, BGSE)

  • Amedeo Piolatto

    (Universitat Autònoma de Barcelona, Institut d’Economia de Barcelona (IEB), BGSE, MOVE)

  • Josep Raya

    (Universitat Pompeu Fabra, ESCSE (Tecnocampus))

Abstract

We model the behaviour of a buyer trying to evade the real estate transfer tax. We identify over-appraisal as a key, easily-observable element that is inversely related with tax evasion. We conclude that the tax authority could focus auditing efforts on low-appraisal transactions. We include ‘behavioural’ components (shame and stigma) allowing to introduce buyers' (education) and societal (social capital) characteristics that explain individual and idiosyncratic variations. Our empirical analysis confirms the predictions using a unique database, where we directly observe: real payment, value declared to the authority, appraisal, buyers' educational level and local levels of corruption and trust.

Suggested Citation

  • José G. Montalvo & Amedeo Piolatto & Josep Raya, 2019. "Transaction-tax evasion in the housing market," Working Papers 2019/03, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2019-03
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    More about this item

    Keywords

    Transfer tax; tax evasion; second-hand housing market; overappraisal; Loan-To-Value; corruption; social capital; stigma; shame; education;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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