NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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M. Chatib Basri

University of Indonesia

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Institutional Affiliation: University of Indonesia

NBER Working Papers and Publications

August 2019Tax Administration vs. Tax Rates: Evidence from Corporate Taxation in Indonesia
with Mayara Felix, Rema Hanna, Benjamin A. Olken: w26150
Developing countries collect a far lower share of GDP in taxes than richer countries. This paper asks whether changes in tax administration and tax rates can nevertheless raise substantial additional revenue – and if so, which approach is most effective. We study corporate taxation in Indonesia, where the government implemented two reforms that differentially affected firms. First, we show that increasing tax administration intensity by moving the top firms in each region into “Medium-Sized Taxpayer Offices,” with much higher staff-to-taxpayer ratios, more than doubled tax revenue from affected firms over six years, with increasing impacts over time. Second, using non-linear changes to the corporate income tax schedule, we estimate an elasticity of taxable income of 0.59, which implies tha...
 
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