2024/06/26 by Samuel Kapon, Lucía Del Carpio, Sylvain Chassang · 1 voice
Economics, Econometrics and Finance · Social Sciences · #Taxation and Compliance Studies #Fiscal Policy and Economic Growth #Gender, Labor, and Family Dynamics
paper · doi:10.1093/qje/qjae018
openalex publication_date 2024/06/26 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/11
Abstract Tax collection with limited enforcement capacity may be consistent with both high- and low-delinquency regimes: high delinquency reduces the effectiveness of threats, thereby reinforcing high delinquency. We explore the practical challenges of unraveling the high-delinquency equilibrium using a mechanism design insight known as divide-and-conquer. Our preferred mechanism takes the form of prioritized iterative enforcement (PIE). Taxpayers are ranked using the ratio of expected collection to capacity use. Collection threats are issued in small batches to ensure high credibility and induce high compliance. Following repayments, liberated capacity is used to issue the next round of threats. In collaboration with a district of Lima, we experimentally assess PIE in a sample of 13,432 property taxpayers. The data validate and refine our theoretical framework. A semi-structural model suggests that keeping collection actions fixed, PIE would increase tax revenue by roughly 10%.