Size-Dependent Tax Enforcement and Compliance: Global Evidence and Aggregate Implications

66 Pages Posted: 13 Mar 2018

See all articles by Pierre Jean Bachas

Pierre Jean Bachas

World Bank

Roberto N. Fattal Jaef

World Bank

Anders Jensen

London School of Economics & Political Science (LSE)

Date Written: March 12, 2018

Abstract

This paper studies the prevalence and consequences of size-dependent tax enforcement and compliance. The identification strategy uses the ranking of industries' average firm size in the United States as an instrument for the size ranking of the same industries in developing countries. Data on 125,000 firms in 140 countries show that tax enforcement and compliance increase with size. Size-dependence is more prevalent in low-income countries, and concentrated at the top of the size distribution. When quantified in a general equilibrium model, removing size dependent enforcement leads to gains in Total Factor Productivity of up to 0.8 percent.

Keywords: Public Finance Decentralization and Poverty Reduction, Public Sector Economics, Public Sector Development, Tax Law, Law and Development, Tax Administration, Economic Adjustment and Lending, Macroeconomics and Economic Growth, Macro-Fiscal Policy, Taxation & Subsidies, Labor Markets, Common Carriers Industry, Pulp & Paper Industry, Business Cycles and Stabilization Policies, Food & Beverage Industry, Industry, Textiles, Apparel & Leather Industry, Construction Industry, General Manufacturing, Plastics & Rubber Industry, Private Sector Development, Business in Development

Suggested Citation

Bachas, Pierre Jean and Fattal Jaef, Roberto N. and Jensen, Anders, Size-Dependent Tax Enforcement and Compliance: Global Evidence and Aggregate Implications (March 12, 2018). World Bank Policy Research Working Paper No. 8363, Available at SSRN: https://ssrn.com/abstract=3139135

Pierre Jean Bachas (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Roberto N. Fattal Jaef

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Anders Jensen

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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