I Evade Taxes, and So What? A New Database and Evidence from Colombia

40 Pages Posted: 13 Mar 2017 Last revised: 17 Mar 2017

See all articles by Leopoldo Fergusson

Leopoldo Fergusson

Universidad de los Andes, Colombia - Department of Economics

Carlos Molina

Universidad de los Andes, Colombia - Department of Economics

Juan Riaño

University of British Columbia (UBC)

Date Written: March 10, 2017

Abstract

Tax evasion lies at the core of the relationship between citizens and the state: it reflects the level of trust in the state and compliance with society’s implicit ‘social contract’. However, empirically analyzing it is challenging, with few direct and reliable measures. This has hampered the advancement of the theoretical and empirical literature, which is especially underdeveloped in the case of indirect tax evasion. We conduct list experiments on a large sample of households to estimate the incidence of value added tax (VAT) evasion, as well as the extent of social desirability bias in respondent answers. Around 20% of respondents engage in evasion and, surprisingly, they are not ashamed to recognize this openly. Evasion is more prevalent in places with more informality and less physical presence of the state, as well as among poorer, less educated individuals, and those who disregard the rule of law.

Keywords: Tax evasion, value added tax, social desirability bias, list experiments

JEL Classification: C83, C93, D73, H26

Suggested Citation

Fergusson, Leopoldo and Molina, Carlos and Riaño, Juan, I Evade Taxes, and So What? A New Database and Evidence from Colombia (March 10, 2017). Documento CEDE No. 2017-21. Available at SSRN: https://ssrn.com/abstract=2932197 or http://dx.doi.org/10.2139/ssrn.2932197

Leopoldo Fergusson (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

HOME PAGE: http://www.googlesyndicatedsearch.com/u/uniandes?q=Leopoldo+Fergusson

Carlos Molina

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Juan Riaño

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

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