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Why Do Firms Evade Taxes? The Role of Information Sharing and Financial Sector Outreach

Author

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  • Beck, T.H.L.

    (Tilburg University, Center For Economic Research)

  • Lin, C.
  • Ma, Y.

Abstract

type="main"> Tax evasion is a widespread phenomenon across the globe and even an important factor in the ongoing sovereign debt crisis. We show that firms in countries with better credit information–sharing systems and higher branch penetration evade taxes to a lesser degree. This effect is stronger for smaller firms, firms in smaller cities and towns, firms in industries relying more on external financing, and firms in industries and countries with greater growth potential. This effect is robust to instrumental variable analysis, controlling for firm fixed effects in a smaller panel data set of countries, and many other robustness tests.
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Suggested Citation

  • Beck, T.H.L. & Lin, C. & Ma, Y., 2010. "Why Do Firms Evade Taxes? The Role of Information Sharing and Financial Sector Outreach," Discussion Paper 2010-93, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:d5eb9928-91a4-4642-93a4-2d645fdc3b75
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    More about this item

    Keywords

    Formal and informal sector; tax evasion; financial sector development;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • G2 - Financial Economics - - Financial Institutions and Services
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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