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Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United StatesJason Matthew DeBackerMiddle Tennessee State University - Department of Economics and Finance Bradley T. HeimIndiana University Bloomington - School of Public & Environmental Affairs (SPEA) Anh TranIndiana University Bloomington - School of Public & Environmental Affairs (SPEA) January 17, 2012 Indiana University School of Public & Environmental Affairs Research Paper No. 2011-10-01 Abstract: This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement.
Number of Pages in PDF File: 51 Keywords: tax evasion, corruption, norms, legal enforcement JEL Classification: H26, M14, D73 working papers seriesDate posted: October 10, 2011 ; Last revised: May 29, 2012Suggested CitationContact Information
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