Tax Professionals: Tax-Evasion Facilitators or Information Hubs?

52 Pages Posted: 15 Apr 2019 Last revised: 7 May 2022

See all articles by Marco Battaglini

Marco Battaglini

Cornell University

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF); Einaudi Institute for Economics and Finance

Chiara Lacava

Goethe University Frankfurt

Eleonora Patacchini

Cornell University

Multiple version iconThere are 2 versions of this paper

Date Written: April 2019

Abstract

To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for tax evasion; and informational externalities generated by the tax professional activities. We provide evidence supporting the simultaneous presence of both mechanisms.

Suggested Citation

Battaglini, Marco and Guiso, Luigi and Guiso, Luigi and Lacava, Chiara and Patacchini, Eleonora, Tax Professionals: Tax-Evasion Facilitators or Information Hubs? (April 2019). NBER Working Paper No. w25745, Available at SSRN: https://ssrn.com/abstract=3372049

Marco Battaglini (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Sallustiana 62
Rome, 00187
Italy
+39 06 4792 4858 (Phone)
+39 06 4792 4872 (Fax)

HOME PAGE: http://www.eief.it/faculty-visitors/faculty-a-z/luigi-guiso/

Einaudi Institute for Economics and Finance ( email )

Via Sallustiana 62
rome, 00187
Italy

Chiara Lacava

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Eleonora Patacchini

Cornell University ( email )

Ithaca, NY 14853
United States

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