The Role of Withholding in the Self-Enforcement of a Value-Added Tax: Evidence from Pakistan

• 成果类型: Article
• 署名作者: Waseem, Mazhar
• 署名单位: University of Manchester
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest_a_00959
• 发表日期: 2022-03
• 页码: 336-354
• 关键词: informality

摘要

I leverage the staggered rollout of VAT in Pakistan to document the role of withholding mechanism in the self-enforcement of a VAT. Focusing on firms already in the tax net, I see how their outcomes respond when the tax is extended upward to intermediates used by them. I find that the upward extension of VAT, which triggers the withholding mechanism, causes an immediate and large (more than 40 log points) surge in sales reported by firms. The evolution of bunching above the zero-liability point and of input costs reported by firms suggests that this large response is indeed driven by the withholding mechanism. I also explore the role of withholding in the extensive margin compliance choices of firms.