Jillie Chang's Books

Digitalization and Tax Compliance Spillovers: Evidence from a VAT E-Invoicing Reform in Peru

By: Mr. Matthieu Bellon,Jillie Chang,Ms. Era Dabla-Norris,Salma Khalid,Juan Carlos Paliza,Pilar Villena

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Digitalization and Tax Compliance Spillovers: Evidence from a VAT E-Invoicing Reform in Peru

By: Mr. Matthieu Bellon,Jillie Chang,Ms. Era Dabla-Norris,Salma Khalid,Juan Carlos Paliza,Pilar Villena

Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who are mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms. Firms are less likely to continue transacting with a partner who has been mandated into e-invoicing, with the effect only partially reversed if both firms adopt e-invoicing, suggesting that network segmentation may occur. Smaller firms who transact with partners mandated into e-invoicing report 11 percent more sales and pay 17 more VAT in the year that their partner is mandated to adopt e-invoicing, suggesting positive spillovers in tax compliance behavior for this subset of firms.

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International Monetary Fund

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ISBN 13

9798400204876

Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru

By: Mr.Matthieu Bellon,Jillie Chang,Ms.Era Dabla-Norris,Salma Khalid,Frederico Lima,Enrique Rojas,Pilar Villena

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Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru

By: Mr.Matthieu Bellon,Jillie Chang,Ms.Era Dabla-Norris,Salma Khalid,Frederico Lima,Enrique Rojas,Pilar Villena

This paper examines the impact of e-invoicing on firm tax compliance and performance using administrative tax data and quasi-experimental variation in the rollout of VAT electronic invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value-added by over 5 percent in the first year after adoption. The impact is concentrated among smaller firms and sectors with higher rates of non-compliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform’s positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue mobilization.

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