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The Impact of Low-Cost Intervention on Tax Compliance: Regression Discontinuity Evidence

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  • Sanchez, Gonzalo E

Abstract

This paper examines the effectiveness of low-cost tax enforcement on compliance using administrative data from Ecuador. To overcome confounding factors, I use a regression discontinuity design that exploits a discrete increase in the probability of receiving a non-compliance notification. Results indicate that the notification significantly increases taxes paid by around $1,400, or 70 percent. Additional findings suggest that this intervention also increases taxes reported in the year following it, and that some taxpayers strategically attempt to evade taxes while trying to avoid being notified. Collectively, these findings suggest that inexpensive interventions can substantially improve tax compliance in low-income countries

Suggested Citation

  • Sanchez, Gonzalo E, 2015. "The Impact of Low-Cost Intervention on Tax Compliance: Regression Discontinuity Evidence," MPRA Paper 94949, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:94949
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    Cited by:

    1. Paul Carrillo & Dina Pomeranz & Monica Singhal, 2017. "Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 144-164, April.
    2. Musharraf Rasool Cyan & Antonios M. Koumpias & Jorge Martinez-Vazquez, 2016. "The Effects of Media Campaigns on Individual Attitudes towards Tax Compliance; Quasi-experimental Evidence from Survey Data in Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1609, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Oronde Small & Leanora Brown, 2020. "Taxpayer Service Provision and Tax Compliance: Evidence for Large Taxpayers in Jamaica," Public Finance Review, , vol. 48(2), pages 250-277, March.
    4. Koppa, Vijetha, 2024. "Can information save lives? Effect of a victim-focused police intervention on intimate partner homicides," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 756-782.

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    More about this item

    Keywords

    Ecuador; tax compliance; tax enforcement; tax evasion; regression discontinuity;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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