Abstract
We study how common administrative procedures affect firm tax evasion. We begin with the counter-intuitive observation that many firms bunch above, rather than below, large notches in China’s corporate income tax. Cross-sectional patterns suggest that administrative procedures in the prepayment and refund system served as de facto enforcement tools that prevented some firms from accessing the reduced tax rates below the notches. Following a regulatory reform that eliminated these procedures, bunching below the notches increased dramatically. The results imply a tradeoff between reducing administrative barriers and allowing much taxpayer non-compliance in low-compliance environments.
Original language | English |
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Article number | 111649 |
Journal | Economics Letters |
Volume | 237 |
DOIs | |
Publication status | Published - 2024 |
Bibliographical note
Publisher Copyright:© 2024 The Author(s)
ASJC Scopus Subject Areas
- Finance
- Economics and Econometrics