Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216627 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8231
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
I leverage a Pakistani tax reform that cuts the tax rate on the supply chains of five major industries of the country from 15% to 0% to cast light on the extent of, and mechanisms driving, VAT noncompliance in a representative emerging economy. I find that firms overclaim refunds by 22% and underreport domestic B2C sales by 43.5%. Together, this implies an evasion rate of 77% in the treated industries and 38% in the population. I explore the role of three mechanisms (1) the destination principle, (2) the last-mile problem, and (3) invoice mills in driving this noncompliance.
Subjects: 
VAT
tax evasion
firm behavior
JEL: 
H25
H26
H32
Document Type: 
Working Paper
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