Productivity and Tax Evasion

34 Pages Posted: 22 Jan 2020

See all articles by Era Dabla-Norris

Era Dabla-Norris

International Monetary Fund (IMF)

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Fedor Miryugin

International Monetary Fund (IMF)

Florian Misch

ZEW – Leibniz Centre for European Economic Research

Date Written: November 2019

Abstract

The extent of tax compliance has important implications for revenue yield, efficiency and the fairness of any tax system. Tax evasion undermines revenue collection, distorts competition, and undermines a country's development prospects. In this paper, we investigate whether higher productivity causally leads to lower tax evasion. We first present stylized facts consistent with this view and develop a model that illustrates one potential transmission channel. Second, we test the model predictions at the firm level using the self-reported share of declared income as proxy for tax evasion for a large sample of emerging and developing economies. Our results suggests that productivity improvements by firms can lead to lower tax evasion.

Keywords: Total factor productivity, National income, Tax revenue, Tax evasion, Labor productivity, Economic Development, Firm Productivity, WP, average productivity, self-employment, OLS, tax purpose, evasion

JEL Classification: D20, H26, O47, E01, H2, K34, H83, O4

Suggested Citation

Dabla-Norris, Era and Gradstein, Mark and Miryugin, Fedor and Misch, Florian, Productivity and Tax Evasion (November 2019). IMF Working Paper No. 19/260. Available at SSRN: https://ssrn.com/abstract=3523135

Era Dabla-Norris (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics ( email )

Beer-Sheva 84105
Israel
+97 2 8647 2288 (Phone)
+97 2 8647 2941 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Fedor Miryugin

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Florian Misch

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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