Working Paper: NBER ID: w30242
Authors: Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal
Abstract: An important but poorly understood form of firm tax evasion arises from the use of "ghost firms"—fake firms that issue fraudulent receipts so that their clients can claim false deductions. We provide a unique window into this global phenomenon using transaction-level tax data from Ecuador. Ghost transactions are widespread, prevalent among large firms and firms with high-income owners, and exhibit suspicious patterns in comparison to ordinary transactions: bunching at round numbers, at the end of the fiscal year, and just below financial system thresholds. We go on to study an innovative enforcement intervention that targeted ghost clients rather than ghosts themselves, which led to substantial tax recovery.
Keywords: tax evasion; ghost firms; tax authority; Ecuador
JEL Codes: H25; H26; H32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ghost firms (L20) | tax evasion (H26) |
| enforcement intervention targeting ghost clients (P37) | reported firm income tax (H32) |
| reported firm income tax (H32) | average tax increase among responding firms (H32) |
| enforcement intervention targeting ghost clients (P37) | tax increases from high-income individuals (H24) |