Digitalization and Tax Compliance Spillovers: Evidence from a VAT e-Invoicing Reform in Peru
40 Pages Posted: 7 Apr 2022
Date Written: March 1, 2022
Abstract
Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who are mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms. Firms are less likely to continue transacting with a partner who has been mandated into e-invoicing, with the effect only partially reversed if both firms adopt e-invoicing, suggesting that network segmentation may occur. Smaller firms who transact with partners mandated into e-invoicing report 11 percent more sales and pay 17 more VAT in the year that their partner is mandated to adopt e-invoicing, suggesting positive spillovers in tax compliance behavior for this subset of firms.
Keywords: VAT, tax compliance, technology spillovers, firm transaction data, transaction data, tax compliance Spillovers, downstream partner, technology adoption spillover, technology spillover, export-oriented firm, Value-added tax, Tax return filing compliance, Spillovers, Positive spillovers, Tax spillovers, Caribbean
JEL Classification: D22, H25, H26, L25, O17, L14, H20, D62, O30
Suggested Citation: Suggested Citation