Digitalization and Tax Compliance Spillovers: Evidence from a VAT e-Invoicing Reform in Peru
Digitalization and Tax Compliance Spillovers: Evidence from a VAT e-Invoicing Reform in Peru
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Volume/Issue:
Volume 2022
Issue 057
Publication date: March 2022
ISBN: 9798400207402
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Topics covered in this book
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Economics- Macroeconomics , Taxation - General , Economics / General , VAT , tax compliance , technology spillovers , firm transaction data , transaction data , tax compliance Spillovers , downstream partner , technology adoption spillover , technology spillover , export-oriented firm , Value-added tax , Tax return filing compliance , Spillovers , Positive spillovers , Tax spillovers , Caribbean
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Summary
Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who are mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms. Firms are less likely to continue transacting with a partner who has been mandated into e-invoicing, with the effect only partially reversed if both firms adopt e-invoicing, suggesting that network segmentation may occur. Smaller firms who transact with partners mandated into e-invoicing report 11 percent more sales and pay 17 more VAT in the year that their partner is mandated to adopt e-invoicing, suggesting positive spillovers in tax compliance behavior for this subset of firms.