Tax Administration versus Tax Rates: Evidence from Corporate Taxation in Indonesia
Author(s)
Basri, M. Chatib; Felix, Mayara; Hanna, Rema; Olken, Benjamin A.
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We compare two approaches to increasing tax revenue: tax administration and tax rates. We show that when Indonesia moved top regional firms into “medium taxpayer offices,” with high staff-to-taxpayer ratios, tax revenue more than doubled. Examining nonlinear changes to corporate income tax rates, we estimate an elasticity of taxable income of 0.579. Combining these estimates, improved tax administration is equivalent to raising top rates on all firms by 8 percentage points. On net, improved tax administration can have significant returns for developing countries. (JEL H25, H26, K34, O17).
Date issued
2021-12-01Journal
American Economic Review
Publisher
American Economic Association
Citation
Basri, M. Chatib, Mayara Felix, Rema Hanna, and Benjamin A. Olken. 2021. "Tax Administration versus Tax Rates: Evidence from Corporate Taxation in Indonesia." American Economic Review, 111 (12): 3827-71.
Version: Final published version
ISSN
0002-8282
Keywords
Economics and Econometrics