Abstract:
Sales from businesses to consumers provide fertile ground for collaborative tax evasion. However, little is known about the phenomenon. We conduct a natural field experiment with 2,900 businesses in which we take the role of consumers and vary if we request an invoice for the delivery of a service. We find that 56% of businesses approach consumers with the intention to evade. The fraction is zero in the regulated market and 72% in the unregulated market. It increases when consumers signal their willingness to collude. Consumers can save 25% of the legal price on average if they agree to evade.
