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Firms as tax collectors

Author

Listed:
  • Dario Tortarolo

    (Institute for Fiscal Studies)

  • Pablo Garriga

    (World Bank)

Abstract

We show that delegating tax collection duties to large firms can bolster tax capacity in weak-enforcement settings. We exploit two reforms in Argentina that dramatically expanded and subsequently reduced turnover tax withholding by firms. Combining firm-to-firm data with regression discontinuity and difference-in-differences methods centered on revenue eligibility thresholds, we find that: (i) appointing large firms as collection agents (CAs) does not hinder their economic activity, (ii) it leads to a significant increase in self-reported sales and tax payments among CAs’ business partners, (iii) these effects are primarily concentrated among downstream firms that lack a traceable paper trail, and (iv) reductions in withholding lead to a decrease in self-reported sales, albeit to a lesser extent. Tax-collecting firms can thus help boost tax compliance and revenue.
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Suggested Citation

  • Dario Tortarolo & Pablo Garriga, 2022. "Firms as tax collectors," IFS Working Papers W22/44, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:22/44
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    References listed on IDEAS

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    Cited by:

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    2. Naruki Notsu & Haruaki Hirota & Nobuo Akai, 2024. "Inter-municipal cooperation and tax enforcement capabilities," OSIPP Discussion Paper 24E004, Osaka School of International Public Policy, Osaka University.

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