No Taxation without Information: Deterrence and Self-Enforcement in the Value Added Tax
Open accessAbstract
Claims that the VAT facilitates tax enforcement by generating paper trails on transactions between firms contributed to widespread VAT adoption worldwide, but there is surprisingly little evidence. This paper analyzes the role of third-party information for VAT enforcement through two randomized experiments among over 400,000 Chilean firms. Announcing additional monitoring has less impact on transactions that are subject to a paper trail, indicating the paper trail's preventive deterrence effect. This leads to strong enforcement spillovers up the VAT chain. These findings confirm that when taking evasion into account, significant differences emerge between otherwise equivalent forms of taxation. (JEL D83, H25, H26, K34, O17)
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Firms systematically misreport their revenues, costs, and wages to the authorities.
“there is a growing body of evidence to show that firms systematically misreport their revenues, costs, and wages to the authorities ( Pomeranz 2015; Carrillo, Pomeranz, and Singhal 2017; Kumler, Verhoogen, and Frías 2015 )”
From Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition (2017) · cites this paper as Pomeranz 2015
Section 1.2 describes firms understating sales or overstating input costs in VAT reporting, and Section 2.2 identifies declarations suggestive of evasion. The paper does not address misreporting wages, so it supports only part of the claim. (LLM, conf=0.88)
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Research works printed but not linked: 29
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- Authors
- Pomeranz, D.
- Affiliations
- National Bureau of Economic Research (US)
- Corresponding author
- Pomeranz, Dina
- ORCID
- Pomeranz, Dina
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2015-08-01
- Volume
- 105
- Issue
- 8
- Pages
- 2539-2569
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W1944585346
- Cited by
- 822
- References
- 0
- Citations by year
- 2026: 96 · 2025: 88 · 2024: 79 · 2023: 89 · 2022: 113 · 2021: 56 · 2020: 62 · 2019: 74 · 2018: 46 · 2017: 40 · 2016: 27 · 2015: 23 · 2014: 7 · 2013: 9 · 2012: 4
- FWCI
- 117.53
- Type
- journal article
- Language
- en
- Open access
- bronze
- doi.org
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Zurich Open Repository and Archive (University of Zurich) (submittedVersion, other-oa)
- Funders
- David Rockefeller Center for Latin American Studies, Harvard University
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Taxation and Compliance Studies
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Taxation and Avoidance
- Keywords
- value added tax, tax enforcement, tax evasion, paper trail, third-party information, deterrence, self-enforcement, tax compliance, Chilean companies
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