Making the Paper Trail Paper-less: Tax Compliance and Informality

Policy Context

In 2014, the Chilean government passed a law making E-Billing mandatory for all firms. The research team traveled to Chile to explore the differences on tax compliance between the firms which were first phased into this law with the firms who were phased in at a later date. In particular, the study examines effects on firm revenue, wages, employment, and input expenditures, as well as upstream and downstream effects to supply chains as firms adopt the new E-Billing policy.

Study Design

In Chile, the digital VAT system mandated by the 2014 E-Bill law was rolled out in five different dates, with firms adopting according to their annual sales and location. Using firm-level data on sales and expenditures from Chile’s Central Bank, the research team examines the law’s effects on tax compliance using a regression discontinuity design. The presence of multiple policy phase-in dates further allows researchers to evaluate the cost effectiveness of the policy with limited assumptions, as well as the formality and structure of supply chains.

Results and Policy Lessons

Results forthcoming.