Importing corruption culture from overseas: evidence from corporate tax evasion in the United States

Nella categoria Analisi e Ricerche da su 23 maggio 2016 0 Commenti

479203-Tax-1355350903-280-640x480Wandering in the web and looking for interesting and inspiring studies on corruption, I bumped into a paper titled “Importing Corruption Culture From Overseas: Evidence From Corporate Tax Evasion In The United States” by Jason DeBacker (Office of Tax Analysis, U.S. Department of the Treasury, United States), Bradley T. Heim, Anh Tran (School of Public and Environmental Affairs, Indiana University, United States), published in the Journal of Financial Economic  in 2015.

They noticed that a substantial fraction of foreign-controlled corporations operating in the US pays little or no income tax (U.S. Government Accountability Office(GAO),2008). The literature suggests that this fact can be related to two different causes: legal tax avoidance and tax compliance.

DeBacker, Heim and Tran suggested that foreign-controlled corporations from more corrupt countries are more likely to evade U.S. taxes.

To test this hypothesis, they used a dataset of 25,541 Internal Revenue Service (IRS) audits of foreign-owned corporation between 1996 and 2007. Corporate tax evasion by foreign-owned corporation provides a natural experiment because firms with different home-country norms are subject to the same legal enforcement setting in the United States. This design allowed them to estimate the influence of home-country corruption norms on firms’ tax evasion behaviour in the US.

As a measure for tax evasion the authors used the ratio of IRS-determined tax deficiency over total income, while corruption norms in the home-country are measured using the Corruption Perception Income (CPI) developed by Transparency International. Finally, given the importance of firms’ size, they examined the effect of corruption norms on tax evasion for firms of different sizes. They also controlled for several other elements such as country’s Gross Domestic Product (GDP) per capita, trade relations, distance from the United States, the firm’s net income, and even country fixed effects.

The results of the study confirmed what the author suggested.

  • High corruption norms are strongly associated with increased tax evasion among small and medium-sized firms.
  • As the firms’ size increases, the effect of corruption culture decreases. This result supports the view that large corporations attenuate the influence of individual norms.
  • Corruption norms have a stronger effect on tax evasion when the firm is a multinational or when the owner comes from a tax heaven.
  • The enforcement efforts implemented in the period object of study, led to a significant decrease in tax evasion among foreign-controlled firms, but were less effective among firms with owners from corrupt countries.

This paper supports the view that the cultural dimension is important in understaning corruption. This is extremely important for developing the right policies to fight this economic and cultural desease.

Italian version


DeBacker, Jason, Bradley T. Heim, and Anh Tran. “Importing corruption culture from overseas: Evidence from corporate tax evasion in the United States.”Journal of Financial Economics 117.1 (2015): 122-138.

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Ho 22 anni e sono una studentessa di Scienze Economiche con il sogno e l’obiettivo di realizzare qualcosa di socialmente utile nella mia vita. Ho scelto questo ambito di studi perché sono certa che sia un campo molto importante, che influenza la vita delle persone in modi più profondi di quanto possa apparire, e che questo settore mi potrà dare la possibilità di aiutare gli altri.

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