Administrative Procedures as Tax Enforcement Tools

Authors

Wei Cui, Allard School of Law at the University of British ColumbiaFollow
Jeff Hicks, University of Toronto
Michael Wiebe, University of British Columbia

Faculty Author Type

Current Faculty [Wei Cui]

Document Type

Working Paper

Publication Date

2024

Subjects

Tax administration, evasion, bunching

Abstract

We study how common administrative procedures affect firm tax evasion. We begin with the counter-intuitive observation that many firms bunch above, rather than below, large notches in China’s corporate income tax. Cross-sectional patterns suggest that administrative procedures in the prepayment and refund system served as de facto enforcement tools that prevented some firms from accessing the reduced tax rates below the notches. Following a regulatory reform that eliminated these procedures, bunching below the notches increased dramatically. The results imply a tradeoff between reducing administrative barriers and allowing much taxpayer non-compliance in low-compliance environments.

Citation Details

Wei Cui, Jeff Hicks & Michael Wiebe, "Administrative Procedures as Tax Enforcement Tools" (2024) [unpublished].