The Cost of Evading: Evidence on Tax Evasion Mitigation from Ecuador
Credit: Rotten Assembly
Policy Context
How do individual and corporate tax evasion and avoidance behaviors respond to changes in the cost of sending funds to tax havens? These are inherently difficult questions to answer given lack of clearly delineated variations in the cost of evasion and comprehensive data sources. However, in 2007, Ecuador installed the Impuesto a la Salida de Divisas (ISD) as a tax on currency outflows. This tax has seen considerable legislative reform since its inception and has at times included and excluded certain types of transactions.
Study Design
Jakob uses a difference-in-difference design to compare changes in outflows to tax havens relative to non-tax havens during the imposition of various changes in this legislative framework.
Results and Policy Lessons
Though unable to attain remote access to the long-term data due to the COVID-19 pandemic, Jakob continued to pursue this work, ultimately receiving a follow-on grant from CEGA where he found significant effects from the changes in tax law.
