Goethe University Frankfurt
House of Finance
Frankfurt am Main, HE 60320
Institutional Affiliation: Goethe University Frankfurt
NBER Working Papers and Publications
|April 2019||Tax Professionals: Tax-Evasion Facilitators or Information Hubs?|
with Marco Battaglini, Luigi Guiso, Eleonora Patacchini: w25745
To study the role of tax professionals, we merge tax records of 2.5 million taxpayers in Italy with the respective audit files from the tax revenue agency. Our data covers the entire population of sole proprietorship taxpayers in seven regions, followed over seven fiscal years. We first document that tax evasion is systematically correlated with the average evasion of other customers of the same tax professional. We then exploit the unique structure of our dataset to study the channels through which these social spillover effects are generated. Guided by an equilibrium model of tax compliance with tax professionals and auditing, we highlight two mechanisms that may be behind this phenomenon: self-selection of taxpayers who sort themselves into professionals of heterogeneous tolerance for t...