Responses of Firms to Tax, Administrative and Accounting Rules: Evidence from Armenia

47 Pages Posted: 23 Jan 2018

See all articles by Zareh Asatryan

Zareh Asatryan

ZEW – Leibniz Centre for European Economic Research

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research; University of Mannheim - School of Economics (VWL); IZA Institute of Labor Economics; University of Essex - Institute for Social and Economic Research (ISER)

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Date Written: November 28, 2017

Abstract

Using panel data on the full population of corporate tax returns from Armenia, we study behavioral responses of firms to three size-dependent regulations. We find: i) a strong response to an accounting notch where IFRS becomes mandatory; ii) a moderate response to an administrative notch below which the frequency of filing taxes declines; and iii) no response to the VAT registration threshold notch. Exploiting tax audits, we provide evidence suggesting that income under-reporting drives the bunching response of firms. Additional evidence suggests that firms respond to audits by compensating additional reported income by a 0.90 dollar increase in deductions.

Keywords: small and medium enterprises, size-dependent regulation, value added tax, tax administration, tax accounting, tax evasion

JEL Classification: H250, H260, O120

Suggested Citation

Asatryan, Zareh and Peichl, Andreas, Responses of Firms to Tax, Administrative and Accounting Rules: Evidence from Armenia (November 28, 2017). CESifo Working Paper Series No. 6754, Available at SSRN: https://ssrn.com/abstract=3106710 or http://dx.doi.org/10.2139/ssrn.3106710

Zareh Asatryan

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Andreas Peichl (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim - School of Economics (VWL) ( email )

Mannheim 68131
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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