On the need to anticipate behavioral responses to policies: the case of multiple refilings on taxpayer behavior in Ecuador

Gómez-Rámirez, Leopoldo and Sánchez, Gonzalo E. (2023): On the need to anticipate behavioral responses to policies: the case of multiple refilings on taxpayer behavior in Ecuador.

Abstract

In this paper we document the use of multiple refilings to evade taxes using administrative data from Ecuador. Then, we develop a model to study the role of multiple refilings on the behavior of taxpayers that received tax notifications because they under-reported taxes. Our model finds that if multiple refilings are possible, then the better decision for selfish taxpayers is to evade taxes. Differently, the model finds that if multiple refilings are not possible, then for taxpayers who exhibit strong social preferences their better decision is to comply even if the probability of being notified is relatively low. The model also shows that banning the possibility of multiple refilings is a necessary but not sufficient condition to achieve true reporting. Nevertheless, the results imply that for both selfish and socially minded taxpayers, limiting the use of multiple refilings reduces their expected payoff of tax evasion and, therefore, increases the probability of tax compliance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax compliance; refiling; tax evasion; Ecuador; policies future effects
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

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