Design of Partial Population Experiments with an Application to Spillovers in Tax Compliance
Accepted at Review of Economics and Statistics (with Guillermo Cruces, Gonzalo Vazquez-Bare); [IFS WP version] (Slides long) (Slides short)
[ABSTRACT and FIGURE]

Firms as Tax Collectors
Journal of Public Economics, March 2024, 233: 105092. (with Pablo Garriga) [Gated version] [IFS Working Paper] (Slides)
[ABSTRACT and FIGURE]

ABSTRACT

This paper estimates the effect of a temporary and large (21 p.p.) value-added tax (VAT) cut along with anti-profiteering measures on food necessities during a period of high inflation in Argentina. Using barcode-level data across more than 3,000 supermarkets, we find that (1) absent the anti-profiteering measures, the pass-through of the temporary VAT cut to prices was asymmetric: prices responded less to the VAT cut than its repeal resulting in prices that were higher than their pre-VAT cut levels; (2) imposing anti-profiteering measures, such as setting a ceiling on price increases, led to symmetric pass-through rates. Using a household welfare model, we show that the VAT cut resulted in progressive welfare effects and that the anti-profiteering measures were successful at dampening the regressive welfare effects of the asymmetric pass-through. However, we show that these policies benefited high-income households more because pass-through rates are more asymmetric in independent grocery stores, which is precisely where low-income households tend to shop the most.

Summary for a broader audience: FocoEcónomico

ABSTRACT

Despite substantial offshore tax evasion, Argentines disclosed assets worth 21% of GDP under a tax amnesty in 2016. We study how enforcement initiatives impact individuals' tax behavior, tax progressivity, and revenue collection. Offshore tax evasion is concentrated among the wealthiest 0.1% of adults. Tax compliance improved, expanding the tax bases for both wealth tax and capital income tax, especially at the top. The subsequent tax hike on foreign assets in 2019 boosted tax progressivity, raising the effective tax rate for the wealthiest 0.1% of adults, and established Argentina's wealth tax as one of the most successful globally in revenue generation.

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 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 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.

We use high-frequency scanner data along with several hundreds naturally occurring variation in price controls at the barcode level in Argentine supermarkets, to uncover new facts about price controls in a setting of high inflation. We use an event study approach where treated goods (barcodes) are compared to otherwise similar goods. First, we show that price controls are indeed effective at holding prices fixed and observe a high rate of compliance. Second, we find little evidence of wide-spread shortages due to the introduction of price controls. Instead, we observe a large increase in quantities purchased, which double on average, as price controls keep prices lower relative to other goods. Third, prices revert to slightly higher levels once a given barcode is no longer subject to price controls, suggesting that such interventions do not have any long lived effects on inflation. As a result, quantities purchased of the controlled barcodes decrease. We also explore substitution behavior between products subject to price controls and close substitutes. The policy seems to have no distributional effects since it benefits rich and poor households equally.

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.

ABSTRACT

We exploit a series of changes in taxation of overtime hours in France to identify the elasticities of the demand and supply of overtime work. Using both exhaustive linked employer-employee data, administrative data on payroll taxes and survey data on paid vs unpaid overtime hours, we examine the effects of firm- and employee-side taxation on overtime hours, firm-level employment and the probability for firms of declaring or not overtime hours. While overtime work can have potentially large consequences on overall employment and on firms’ capacity to react to shocks, it remains unclear what drives labor demand and supply of overtime. Our project explores these channels.

Two understudied areas in Public Finance are the role of tax professionals and the role of networks in tax administration and enforcement (Slemrod, 2019). 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).