Disentangling Tax Evasion from Inefficiency in Firms Tax Declaration: An Integrated Approach

28 Pages Posted: 6 Sep 2019 Last revised: 16 Sep 2019

See all articles by Giancarlo Ferrara

Giancarlo Ferrara

SOSE - Soluzioni per il Sistema Economico SpA; University of Palermo - Department of Economics, Business and Statistics

Arianna Campagna

SOSE

Vincenzo Atella

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS); Department of Economics and Finance; University of Rome Tor Vergata - Faculty of Economics

Date Written: September 6, 2019

Abstract

In this article we present a new methodology to support fiscal monitoring by the Italian Revenue Agency (IRA) with the aim of improving current taxpayers fiscal compliance and fighting tax evasion within small and medium enterprises. In fact, given the methodology behind the Sector Studies (Studi di Settore - SdS) system, there is room for firms to implement tax evasion strategies by simply adjusting revenues (and costs) toward an estimated average threshold (known ex-ante), the so called "presumptive" revenues, and achieving the fiscal "congruity" status. By estimating a production function through stochastic frontier analysis we avoid estimating the average threshold know ex-ante and can combine information on firm economic efficiency with those on fiscal congruity, thus being able to disentangle underreporting of revenues due to potential firm tax evasion behaviours from underreporting due to firm inefficiencies. We apply this framework to two samples of Italian firms belonging to two Sector Studies. Our results confirm the potentiality of the approach, although more work is needed before moving to a large scale implementation for policy purposes.

Keywords: Compliance, Tax evasion, Fiscal monitoring, Production, Sector Studies, Efficiency

JEL Classification: H26, D24, C14.

Suggested Citation

Ferrara, Giancarlo and Campagna, Arianna and Atella, Vincenzo, Disentangling Tax Evasion from Inefficiency in Firms Tax Declaration: An Integrated Approach (September 6, 2019). CEIS Working Paper No. 468. Available at SSRN: https://ssrn.com/abstract=3449228 or http://dx.doi.org/10.2139/ssrn.3449228

Giancarlo Ferrara

SOSE - Soluzioni per il Sistema Economico SpA ( email )

Via Mentore Maggini
Rome, 00143
Italy

University of Palermo - Department of Economics, Business and Statistics ( email )

Viale delle Scienze
Palermo, 90100
Italy

Arianna Campagna

SOSE ( email )

Rome
Italy

Vincenzo Atella (Contact Author)

University of Rome Tor Vergata - Centre for International Studies on Economic Growth (CEIS) ( email )

Via Columbia, 2
Rome, I-00133
Italy
+39 06 72595648 (Phone)

Department of Economics and Finance ( email )

Via Columbia 2
Roma, 00133
Italy

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
I-00133 Rome, 00133
Italy
+39 06 72595635 (Phone)
+30 06 2020 500 (Fax)

HOME PAGE: http://www.economia.uniroma2.it/sefemeq/professori/atella/

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