Working Paper: NBER ID: w29059
Authors: Miguel Almunia; Jonas Hjort; Justine Knebelmann; Lin Tian
Abstract: Are firms sophisticated maximizers, or do they consistently make errors? Using transaction-level data from Ugandan value-added tax (VAT) returns, we show that sellers and buyers report different amounts 79% of the time, despite invoices being easily cross-checked. We estimate that 25% of firms are disadvantageous misreporters—they systematically misreport own sales and purchases such that their tax liability increases—while 75% are advantageous misreporters. Many firms—especially disadvantageous misreporters—fail to report imported inputs they themselves reported at Customs, increasing their VAT liability. On net, unilateral VAT misreporting cost Uganda about US$384 million in foregone 2013-2016 tax revenue
Keywords: VAT; Tax Reporting; Firm Behavior; Uganda
JEL Codes: D2; D9; H2; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| transaction-level data from VAT returns (Y10) | discrepancies in VAT reporting (H25) |
| discrepancies in VAT reporting (H25) | tax liability (H20) |
| disadvantageous misreporters (D91) | tax liability (H20) |
| advantageous misreporters (G14) | tax liability (H20) |
| misreporting (C59) | foregone tax revenue (H27) |
| advantageous misreporters (G14) | foregone tax revenue (H27) |
| reporting category persistence (C59) | firm behavior (D21) |
| firm characteristics (L20) | likelihood of advantageous or disadvantageous reporting (C52) |