Does It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitability

McKenzie, David ; Sakho, Yaye Seynabou

World Bank, Washington, DC

关键词: ACCESS TO INFORMATION;    BANK LOAN;    BANK POLICY;    BUSINESS ASSOCIATIONS;    BUSINESS ENTRY;   

DOI  :  10.1596/1813-9450-4449
RP-ID  :  WPS4449

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper estimates the impact ofregistering for taxes on firm profits in Bolivia, thecountry with the highest levels of informality in LatinAmerica. A new survey of micro and small firms enables theauthors to control for a rich set of measures of ownerability and business motivations that can affect bothprofits and the decision to formalize. The paper identifiesthe impact of tax registration on business profitabilityusing the distance of a firm from the tax office whereregistration occurs, conditional on the distance to the citycenter, as an instrument for registration. Proximity to thetax office provides firms with more information aboutregistration, but is argued to not directly affect profits.The findings show that tax registration leads tosignificantly higher profits for the firms that theinstrument affects. However, there is also evidence ofheterogeneous effects of tax formality on profits. Taxregistration is found to increase profits for the mid-sizefirms in the sample, but to lower profits for both thesmaller and larger firms, in contrast to the standard viewthat formality increases profits. The analysis shows thatowners of large firms who have managed to stay informal havehigher entrepreneurial ability than formal firm owners, incontrast to the standard view (correct among smaller firms)that informal firm owners have low ability.