Information, Asymmetric Incentives, or Withholding? Understanding the Self-Enforcement of Value-Added Tax

79 Pages Posted: 25 Jul 2019

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

During the period 1996-2000, the coverage of VAT in Pakistan rose by twenty times in terms of the number of firms in the tax net and by ten times in terms of the volume of transactions subject to it. This paper leverages this staggered introduction of VAT in the country to estimate its enforcement spillovers. Focusing on firms already in the tax net, I explore if their tax compliance improves as VAT gets extended to their trading partners. Using differential responses to upward and downward extension of the tax, I characterize the mechanisms underlying the self-enforcement response.

Keywords: VAT, tax evasion, informality

JEL Classification: H250, H260, O170

Suggested Citation

Waseem, Mazhar, Information, Asymmetric Incentives, or Withholding? Understanding the Self-Enforcement of Value-Added Tax (2019). CESifo Working Paper No. 7736. Available at SSRN: https://ssrn.com/abstract=3422631

Mazhar Waseem (Contact Author)

University of Manchester ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

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