Tax Return as a Political Statement

Abstract

The accuracy of a tax return is usually interpreted as an outcome of the tax evasion decision by an individual. However, in non-democratic regimes with predatory blackmail tax systems it is possible that large sums voluntarily reported by influential politicians or businessmen may be used as political signals. In this paper we explore the idea of a tax return as a political statement and test it using a unique dataset of the tax returns filed by the Russian regional governors and the members of their families for the year 2009. Our results conjecture that Russian governors may deliberately file their tax return as a political statement to signal their strength, making them more costly to fire for the federal center.

Keywords: tax compliance, communication in non-democracies, Russian regions

JEL Classification: D73, D78, H26, P26