The Incidence of VAT Evasion

68 Pages Posted: 30 Jun 2020 Last revised: 10 Nov 2020

See all articles by Zareh Asatryan

Zareh Asatryan

ZEW – Leibniz Centre for European Economic Research

David Gomtsyan

ZEW – Leibniz Centre for European Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

Who benefits from the evasion of value added taxes (VAT)? Using a reform that enforced VAT on previously non-compliant large retailers in Armenia, we estimate a onethird passthrough of the tax burden on prices. This suggests that pre-enforcement evasion rents were broadly shared with consumers through lower prices. Our theoretical and empirical results explain this low passthrough rate by the supply-chain effects and second-order compliance responses of firms to VAT enforcement. Our distributional analysis shows that households at the bottom of the income distribution benefit more from the rents of evasion.

Keywords: Value added tax, Incidence, Evasion, Enforcement, Distributional Effects

JEL Classification: D11, H22, H26

Suggested Citation

Asatryan, Zareh and Gomtsyan, David, The Incidence of VAT Evasion (2020). ZEW - Centre for European Economic Research Discussion Paper No. 20-027, Available at SSRN: https://ssrn.com/abstract=3633730 or http://dx.doi.org/10.2139/ssrn.3633730

Zareh Asatryan (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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

David Gomtsyan

ZEW – Leibniz Centre for European Economic Research ( email )

L 7, 1
Mannheim, L 7, 1
Germany

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