What You Do (and What You Don’t) Get When Expanding the Net - Evidence from Forced Taxpayer Registrations in South Africa

73 Pages Posted: 12 Jun 2020

See all articles by Collen Lediga

Collen Lediga

Ruhr University of Bochum

Nadine Riedel

University of Münster

Kristina Strohmaier

University of Tuebingen

Date Written: June 2, 2020

Abstract

A significant share of firms in developing countries is not registered for income taxation. Expanding the tax net is a priority for many governments, but most formalization policies proved relatively ineffective in bringing firms into the tax net. We show that snapshot-synchronizations of the business tax and the commercial registry in South Africa led to a large-scale expansion of the South African business taxpayer net. While the targeted non-compliers are one of the fiscally most valuable segments of unregistered firms, we document that the interventions resulted in relatively little additional tax revenues, owing to entities’ weak post registration tax compliance and small firm size. Additional analyses suggest that the snapshot-synchronizations significantly reduced firms’ tendency to late register for business tax purposes, but did not trigger genuinely new voluntary business tax registrations. Our results highlight that the per-entity gains of formalization measures are small and must be carefully balanced against costs.

Keywords: tax compliance, less developed countries

JEL Classification: H2

Suggested Citation

Lediga, Collen and Riedel, Nadine and Strohmaier, Kristina, What You Do (and What You Don’t) Get When Expanding the Net - Evidence from Forced Taxpayer Registrations in South Africa (June 2, 2020). Available at SSRN: https://ssrn.com/abstract=3616808 or http://dx.doi.org/10.2139/ssrn.3616808

Collen Lediga

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Nadine Riedel (Contact Author)

University of Münster ( email )

Universitätsstraße 14-16
Münster, 48143
Germany

Kristina Strohmaier

University of Tuebingen

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

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