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Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States

Indiana University School of Public & Environmental Affairs Research Paper No. 2011-10-01

51 Pages Posted: 10 Oct 2011 Last revised: 29 May 2012

Jason Matthew DeBacker

University of South Carolina - Darla Moore School of Business

Bradley T. Heim

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Anh Tran

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Multiple version iconThere are 2 versions of this paper

Date Written: January 17, 2012

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.

Keywords: tax evasion, corruption, norms, legal enforcement

JEL Classification: H26, M14, D73

Suggested Citation

DeBacker, Jason Matthew and Heim, Bradley T. and Tran, Anh, Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States (January 17, 2012). Indiana University School of Public & Environmental Affairs Research Paper No. 2011-10-01. Available at SSRN: https://ssrn.com/abstract=1941412 or http://dx.doi.org/10.2139/ssrn.1941412

Jason Matthew DeBacker

University of South Carolina - Darla Moore School of Business ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States

Bradley T. Heim

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Anh Tran (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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