ABSTRACT

This paper studies the effectiveness of tax amnesties and their impacts on capital taxation and public spending. We leverage rich policy variation from Argentina, where left- and right-wing governments implemented multiple programs and achieved varying success. After numerous failed efforts, its 2016 scheme reportedly revealed assets worth 21% of GDP—the world’s most successful tax amnesty. We use detailed data from fiscal tabulations spanning two decades and obtain three key results. First, despite substantial offshore evasion, declared foreign assets quadrupled after the 2016 amnesty. Second, disclosures were extensive among the wealthiest 0.1% of individuals, who more than doubled their declared assets. Third, improving tax compliance has sizable fiscal externalities on capital taxes and social transfers: the wealth and capital income tax bases more than doubled, and the amnesty’s earmarked revenue boosted pension benefits by 15%. We conclude by discussing the lessons from Argentina’s experience with amnesty programs.

ABSTRACT

This paper shows that governments can affect tax incidence, in contrast to canonical public finance results that imply that tax incidence only depends on the relative magnitude of the supply and demand elasticities. To do so, we use high-frequency retail scanner data from Argentina, along with a temporary 21 percentage point VAT cut on essential goods whose pass-through to prices was encouraged by the government to be 100% for the VAT cut and mandated to be no more than 33% for the VAT increase. We implement a difference-in-differences approach comparing goods that are subject to the VAT cut and/or to the pass-through mandates to those that are not. First, we find that a large portion of the VAT cut, 60%, is passed through to prices, in contrast to what recent empirical research has found. Second, we show that the price mandates were successful at ensuring gradual price increases when the VAT cut was repealed. Third, we assess the distributional effects of this policy. While its goal was to guarantee access to necessities for low-income households in a period of high inflation, we find that the pass-through rate of the VAT cut in chain supermarkets was double that of independent supermarkets. And we show that low-income households tend to shop more at independent supermarkets. Therefore, while the government was successful at engineering a price decrease using the VAT cut, it partially failed to reach the target population.

Summary for a broader audience: FocoEcónomico

ABSTRACT

We set up a framework to conduct experiments for estimating spillover effects when units are grouped into mutually exclusive clusters. We improve upon existing methods by allowing for heteroskedasticity, intra-cluster correlation and cluster size heterogeneity, which are typically ignored when designing experiments. We show that ignoring these factors can severely overestimate power and underestimate minimum detectable effects. We derive formulas for optimal group-level assignment probabilities and the power function used to calculate power, sample size, and minimum detectable effects. We apply our methods to the design of a large-scale randomized communication campaign in a municipality of Argentina to estimate total and neighborhood spillover effects on property tax compliance. Besides the increase in tax compliance of individuals directly targeted with our mailing, we find evidence of spillover effects on untreated individuals in street blocks where a high proportion of taxpayers were notified.

ABSTRACT

We study the implications of delegating tax collection duties to firms. We exploit a major reform to the withholding regime of the turnover tax in the City of Buenos Aires, where several large firms were appointed to act as collection agents (CAs) based on a predetermined revenue threshold. Combining rich firm-to-firm administrative data with quasi-experimental methods, we show that: (i) firms newly appointed as CAs do not change their reported business activity, (ii) firms with preexisting commercial ties to CAs increase their reported sales, and (iii) the government collects more tax revenue. The analysis of a subsequent reform that reduced third-party tax collection shows that firms respond symmetrically by reducing their reported sales. Our findings suggest that reforms to tax administrations can have a considerable impact when it comes to raising revenue and building tax capacity.

Summary for a broader audience: WB Development Impact Blog

ABSTRACT

We exploit a large, quasi-randomized, 2.5-year-long income tax holiday to identify intertemporal labor responses of high-wage earners to net wage changes. In August 2013, the Argentine government exempted a group of wage earners from the income tax for 2.5 years while leaving in place the tax on other high-wage earners. Eligibility was based on whether past wage earnings were below a fixed threshold, thus levying sharply different marginal and average tax rates—effectively 0% for workers below the threshold. Using rich population-wide administrative data and a regression discontinuity design, we estimate a precise and very small wage earnings elasticity of 0.017 for this large, salient, and temporary income tax change. Responses are larger for more flexible outcomes (overtime hours) and for more elastic groups (job switchers and managers). We also find avoidance responses from new entrants who faced no tax if their first monthly wage was below the fixed threshold. This strategic entry below the threshold to dodge taxes required coordination with employers. Our findings suggest the presence of rigidities in the labor market, which imply that wage earners' responses to tax changes depend largely on substantial coordination with employers.

ABSTRACT

We explore whether the way in which tax credits are disbursed affects the gross wage of workers. We exploit an unusual reform in Argentina that shifted the disbursement responsibility of child benefits from employers to a government agency in staggered fashion, from 2003 to 2010. Using population-wide administrative data and an event-study approach based on firms' switching date set by the government, we show that the way tax credits are disbursed matters for the final economic incidence. Our evidence suggests that employers capture about 6-14 percent of the transfers through lower wages when they mediate the payments. We argue that in the firm-based system, transfers were likely understood as part of the starting compensation package and employers exploited this confusion to extract rents. Our findings therefore accord with the hypothesis that transfers are not entirely captured dollar for dollar by workers. More generally, this paper suggests that relying on firms as mediators in the tax-benefit system could have unintended consequences; as less salient schemes may lead to rent capture.

ABSTRACT

We disentangle the extent of imperfect competition in product and labor markets using plant-level data. We derive a formula for the ratio between markups and markdowns assuming cost-minimizing firms that face upward-sloping labor supply and downward-sloping product demand curves. We then separate this combined measure of market power by estimating firm-level labor supply elasticities instrumenting wages with a different set of instruments including the use of intermediate inputs, input price shocks, and TFP shocks. Our results suggest that both markets exhibit imperfect competition, but the variation is mainly driven by markups. We also estimate the relative gains of removing market power dispersion on allocative efficiency, finding that markups are more important on TFP than markdowns.

ABSTRACT

We estimate the response of firms and self-employed workers to two revenue taxes—Monotributo and Gross Receipts Tax—across the turnover distribution using rich administrative data from Argentina. We exploit several revenue-dependent discontinuities that provide incentives to underreport taxable income combined with a bunching design to estimate sales elasticities. We also explore heterogeneities by firm size, type of activities, and type of taxpayers. In the case of small firms, we find sizeable bunching below the thresholds that is stronger for higher tax incentives. The response is stronger in sectors that have more space for manipulation, such as service-based activities. In the case of medium and large firms, bunching is more muted but it suggests that even large firms are able to underreport their gross sales to avoid facing higher tax rates. Firms also seem to find more costly the indirect administrative cost of becoming a collection agent than the direct fiscal cost of the Gross Receipts Tax. We cannot rule out, however, that large firms adjust other margins (or taxes) to compensate for the higher tax pressure.

Two understudied areas in Public Finance are the role of tax professionals and the role of networks in tax administration and enforcement (Slemrod, 2018). In this project I seek to answer two questions: First, whether it is more cost-effective to communicate tax preparers or taxpayers to improve tax compliance; Second, whether there are spillover effects from targeted to non-targeted taxpayers that form part of the same network (those sharing the same accountant). To that end, I run a large scale randomized communication experiment where I send deterrence emails to taxpayers and/or accountants (about 100,000 taxpayers in the treatment group and 900,000 in the control group).

We study the efficiency and distributional effects of price controls. Despite the controversy surrounding the effects of this regulation, surprisingly little has been done in practice to test the contrasting predictions. In this project, we aim to fill this gap by exploiting scanner data and quasi-experimental variation from price regulations introduced in the Argentine retail sector in 2014. We first study the effect of price controls on the supply of targeted products, spillovers on similar products, and explore how it differs by the level of concentration in the product's industry. Guided by these results, in the second part of the paper we estimate markups at the product level and explore whether price controls can affect the level of concentration in the industry. In the third part, we study the distributional and welfare effects of price controls.