The Spillover Effects of Crime on Firm Tax Evasion

80 Pages Posted: 19 Jan 2022 Last revised: 25 Jan 2022

See all articles by Tom Kisters

Tom Kisters

Vienna University of Economics and Business - Department of Economics

Date Written: January 19, 2022

Abstract

This paper uses firm-level survey data to explore whether the extent to which firms perceive taxes and crime as impediments to their operations and growth (perceived constraints) affects firm tax evasion. To rule out spurious covariation, I use reported crime incidences as an instrumental variable. I establish a negative effect of perceived constraints on sales reported for tax purposes. The effect is large and amounts to a drop in reported sales of 3.4-13.6% in the preferred specification. I hypothesise that this result is best explained by negative reciprocal behaviour against the state. The result is robust when adding a second instrument (Power Outages) and different controls.

Keywords: Reciprocity, Crime, Crime Perception, Tax evasion, Instrumental Variable

JEL Classification: C26, H26, H25, H41, D22, D62, C31

Suggested Citation

Kisters, Tom, The Spillover Effects of Crime on Firm Tax Evasion (January 19, 2022). WU International Taxation Research Paper Series No. 2022-03, Available at SSRN: https://ssrn.com/abstract=4012652 or http://dx.doi.org/10.2139/ssrn.4012652

Tom Kisters (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

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