Working Paper: NBER ID: w17770
Authors: Jason M. Debacker; Bradley T. Heim; Anh Tran
Abstract: This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement.
Keywords: Corruption; Tax Evasion; Cultural Norms; Corporate Behavior
JEL Codes: D73; H25; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| owners' corruption norms (D73) | corporate tax evasion (H26) |
| higher corruption norms (D73) | increased tax evasion (H26) |
| corruption norms of foreign owners (F23) | tax evasion in the U.S. (H26) |
| size of corporation (L25) | effect of corruption norms on tax evasion (H26) |
| cultural norms (Z13) | corporate behavior (M14) |
| U.S. enforcement measures (H26) | tax compliance (H26) |
| corruption norms (D73) | challenge to legal enforcement (K40) |