We evaluate the impact of the 2017 Tax Cuts & Jobs Act (TCJA) pension tax break on sponsor contributions to defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to the tax break. We find that the tax break induced an extra $2.8 billion of sponsor contributions to medium- and large-scale plans in 2017. However, we find strong evidence of reversal, both in terms of sponsor contributions and plan funding ratios by 2018. Our contributions model indicates that this reversal is consistent with more binding financial constraints in 2018 relative to 2019. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds.

International migration represents a potential channel for the transmission of norms, attitudes, and values back to the home countries. In this paper, we explore how international migration affects tax morale and aversion to the free-riding of members of the household left behind in the home country. We use a rich longitudinal household-level database on Polish society (period 2007–2015) that allows us to observe social attitudes and values of individuals before and after the actual migration of a member of the household. We find that having a migrant in the household has a significant and positive effect on tax morale and increases aversion toward free-riding of stayers. We also find that migrants have a lower level of tax morale before departure compared to stayers, suggesting that international migration leads to an overall gain in pro-social behaviors.

The paper examines the legacy of pre-colonial centralization on tax compliance norms of citizens in contemporary Uganda. Using a regression discontinuity analysis on neighboring ethnic homelands with different levels of pre-colonial centralization, we find that pre-colonial centralization is correlated with stronger norm for tax compliance. The result is explained by the legacy of location-specific capacity of centralized states in upholding authority and a strong social cohesion exhibited through higher interpersonal trust but not through trust in public institutions.

Despite substantial endeavours of international institutions and governments around the world to promote decent work, recent years have witnessed resurgence of non-standard and precarious labour practices. This article scrutinises one of the most recently described types of non-standard work, which is known as quasi-formal or under-declared employment. Companies relying on this illegitimate strategy, which is particularly prevalent in Europe, deliberately misreport the take-home pay of their formally employed workers. Alongside the officially declared wage, a quasi-formal worker thus receives an additional cash-in-hand payment which remains untaxed. To explore why so many European Union workers accept quasi-formal jobs in spite of obvious limitations, we report the evidence from interviews with 616 workers who were surveyed within the Special Eurobarometer 284/Wave 67.3. A two-level cumulative logistic regression emphasises tax morale and the exact function of the cash-in-hand payment as the key factors in this respect. On the other hand, neither perceived detection risk nor expected penalties are found to affect the readiness of quasi-formal workers to keep obeying an illegitimate arrangement with their employer. These findings therefore endorse recent studies on the matter, which illuminate low trust in the state and fellow citizens as the main reason for many workers to voluntarily misreport their income.

In spite of a growing body of literature on quasi-formal employment in the European Union (EU), there is still limited knowledge regarding the exact functioning of this illegal employment scheme. To fill this gap, we report data from the 2019 Special Eurobarometer on undeclared work, which reveals that 30.1% of European workers have higher income from employment than reported to tax authorities. Explicitly, 2.6% of registered dependent employees are entitled to cash top-ups to the official wage, for 7.8% of them the amount of supplementary payments depends on the work efforts, whereas 9.2% receive informal remuneration under multiple arrangements. In addition to these ‘regular recipients’, we also found that 10.5% of employees in the EU can be classified as ‘sporadic quasi-formal workers’. Besides showing that wage underreporting is far more pervasive than previously assumed, the study also offers a more nuanced insight into different manifestations of this illicit practice in the EU. Results of a two-level random intercept multinomial logit model reveal that women are less likely to receive fixed and variable cash-in-hand payments, whereas older individuals have a lower propensity to receive work-time-related income. The analysis also highlights that professionals, service sector employees, manual job workers and individuals whose jobs require travelling are more prone to variable wages compared to the rest of the population. Given a modest success in combating the phenomenon to this date, these findings will be particularly valuable for policymakers in their endeavours to devise tailored policy measures.

We investigate tax fraud in a major export-promotion program in India – the Duty Drawback scheme – which enables exporting firms to claim a cash rebate proportional to the value of their exports, at a product-specific drawback rate. We detect fraud based on two approaches. First, we show that bilateral trade asymmetries between reported exports by India and reported imports by trading partners of the same trade flows are systematically correlated with the rate of drawback, suggesting that exporting firms over-report exports to unduly gain duty drawback. Second, we find evidence of excess bunching in the distribution of unit values reported by India at kinks in the per-unit drawback schedule, relative to the distribution of unit values reported by importing countries. Our results suggest that fraud currently detected by customs represents only 3.8%–6% of actual fraud.

Tax evasion can be considered as a systemic fraud in which different parties such as taxpayers, lawyers, banks, and multinational entities interact. Here, accountants are key agents owing to their legal liability in tax reporting and their knowledge on accounting rules. The present study analyzes the role that accountants play in firms tax evasion by presenting evidence from a randomized field experiment carried out with microenterprises in Ecuador’s tax system in early 2016. The article evaluates to what extent a notification of accountants is more effective in increasing tax reporting than a notification of taxpayers, through five different treatments. The results show that simultaneous persuasive notifications of both accountants and taxpayers were the unique treatment that significantly increased firms’ declared income tax. Furthermore, it was shown that penalty notifications of accountants, rather than taxpayers only, were the most significant treatment at reducing revenue underreporting.

With a linear public goods game played in six different variants, this article studies two channels that might moderate social dilemmas and increase cooperation without using pecuniary incentives: moral framing and shaming. We find that cooperation is increased when noncontributing to a public good is framed as morally debatable and socially harmful tax avoidance, while the mere description of a tax context has no effect. However, without social sanctions in place, cooperation quickly deteriorates due to social contagion. We find ‘shaming’ free-riders by disclosing their misdemeanor to act as a strong social sanction, irrespective of the context in which it is applied. Moralizing tax avoidance significantly reinforces shaming, compared with a simple tax context.

This article explores whether income underreporting for tax purposes can explain why the majority of U.S. farmers earn low or negative net farm income. Using 10 years of U.S. Department of Agriculture farm-level data, the extent of underreporting is estimated by exploiting the fact that farm households face an incentive to underreport farm income that varies with their reported off-farm income. Results indicate that 39% of total farm income is underreported. For large farms, the results imply a substantial discrepancy between reported and earned farm income. For small-scale operations, underreporting reduces but does not eliminate the gap between farm and off-farm wages.

El artículo analiza los cambios en la estructura tributaria de Yucatán, México, durante la transición del régimen colonial a la fiscalidad liberal, de 1850 a 1902. Caracteriza sus etapas en función de la composición y el protagonismo alternativo de los impuestos directos y los impuestos indirectos en las rentas públicas. Durante los profundos cambios en la estructura económica, la tributación indirecta al consumo y los impuestos directos sobre los sectores secundario y terciario protegieron el crecimiento del sector productivo del henequén (1869-1882). Finalmente, el impuesto sobre el henequén no sustituyó a los ingresos indirectos. La modernización fiscal (1896-1902) equilibró la tributación directa de producto con los aplicados a sectores más urbanos, el secundario y las ventas del sector mercantil.

Cet article spécifie un cadre analytique permettant de déterminer la demande de grosses coupures qui, selon les travaux empiriques, émane essentiellement de l'économie souterraine. Cette demande permet d'alimenter une thésaurisation qui échappe à l'imposition et de financer des transactions qui du fait de leurs montants importants sont essentiellement financières.

Malgré son caractère très stylisé, le modèle utilisé permet de fonder théoriquement des relations établies sur le plan empirique entre la demande de billets et des variables, comme la pression fiscale et les taux de rendements des actifs financiers. Il formalise également certains arguments et intuitions exprimés en termes littéraires sur le rôle de la moralité fiscale, des mesures de contrôle et du coût du blanchiment dans le développement de l'économie souterraine que traduit celui de la demande de billets.

Sur la base des résultats ainsi obtenus, on analyse les mesures qui peuvent être envisagées par les autorités publiques pour agir sur le volume des grosses coupures offertes et demandées en vue d'influencer le développement des activités financières souterraines.