Department of Economics, E52-300
50 Memorial Drive
Cambridge, MA 02142
Institutional Affiliation: Massachusetts Institute of Technology
NBER Working Papers and Publications
|August 2019||Tax Administration vs. Tax Rates: Evidence from Corporate Taxation in Indonesia|
with M. Chatib Basri, 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...