Browsing by Author "Almunia, Miguel"

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    An Analysis of Discrepancies in Tax Declarations Submitted Under Value-Added Tax in Uganda
    (London, London School of Economic and Political Science, International Growth Centre, 2017-04-04) Almunia, Miguel; Knebelmann, Justine; Nakyambadde , Dorothy; Claude, Raisaro; Lin, Tian
    Many low-income countries (LICs) have implemented Value-added tax (VAT) systems during the last decades on the recommendation of economists, who predict that VATs should (i) not distort production, (ii) help create paper trails, and (iii) generate offsetting misreporting incentives for transacting pairs of firms. Paper trails and offsetting misreporting incentives are argued to especially benefit tax enforcement in LICs. But this only holds if the revenue authority has sufficient resources (manpower, training programs, etc) to “act on” these enforcement-friendly properties, and firms believe the revenue authority to have such resources. We evaluate the actual performance of Uganda’s VAT, using three years of tax-declaration level data from the Uganda Revenue Authority (URA). We show that the distribution of reported value added amounts is suspiciously low, with substantial consequences for tax revenue. This is despite the fact that firms are required to submit monthly reports on the amount bought from/sold to any transaction partner declared under the VAT – paper trails – to the URA. We use these to compare the amount reported by sellers and buyers and find widespread discrepancies. We investigate the potential drivers of these discrepancies, and what types of firms are more likely to report mismatching amounts. Finally, we discuss a pilot program to attempt to tackle the uncovered discrepancies currently being designed in collaboration with URA.
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    Firm Networks and Tax Compliance: Experimental Evidence from Uganda
    (2024-02-08) Almunia, Miguel; Justine, Knebelmann; Nakyambadde, Dorothy; Tian, Lin
    How do tax enforcement interventions diffuse through firm-to-firm networks? We explore this question with a randomized trial in Uganda. Using transaction-level VAT data, we map seller-buyer networks and identify discrepancies in the amounts reported by trading partners. Enforcement letters highlighting these discrepancies are sent to either the seller, the buyer, or both. The correction rate in the treatment group is 23.8%, fourteen times higher than in the control group. This response is asymmetric: corrections are primarily made by sellers, even when only buyers receive letters, providing novel evidence that firms can induce changes in their partners’ tax reporting. Spillover effects extend to transactions not listed in the letters, including those involving other trading partners. The intervention also results in sustained improvements in reporting behavior over subsequent months. Our study sheds light on firm-to-firm communication within networks and offers policy-relevant insights for fighting tax evasion.