Technology, Taxation, and Corruption: Evidence from the Introduction of Electronic Tax Filing
62 Pages Posted: 23 May 2018
Date Written: May 22, 2018
Abstract
Many e-government initiatives introduce technology to improve efficiency and avoid potential human bias. Electronic tax filing (e-filing) is an important example, as developing countries increasingly adopt online submission of tax declarations to replace in-person submission to tax officials. This paper examines the impact of e-filing on compliance costs, tax payments, and bribe payments using experimental variation and data from Tajikistan firms. Firms that e-file have lower compliance costs, spending five fewer hours each month on fulfilling tax obligations. There are no significant average effects of e-filing on tax or bribe payments, but significant heterogeneity exists across firms by their baseline likelihood of tax evasion. Among firms previously more likely to evade, e-filing doubles tax payments, likely by disrupting collusion with officials. Conversely, among firms less likely to have been evading, e-filing reduces tax payments, suggesting that officials had previously required them to pay more. These firms also pay fewer bribes, as e-filing reduces opportunity for extortion. In all, the results indicate that e-filing reduces compliance costs and makes the distribution of tax payments across firms arguably more equitable.
Keywords: Economic Adjustment and Lending, Macro-Fiscal Policy, Taxation & Subsidies, Tax Administration, Tax Law, Public Finance Decentralization and Poverty Reduction, Public Sector Economics, De Facto Governments, E-Government, Economics and Finance of Public Institution Development, E-Government, Public Sector Administrative and Civil Service Reform, Public Sector Administrative & Civil Service Reform, Democratic Government, E-Government, International Trade and Trade Rules
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