The challenge
High levels of tax evasion are one of the main reasons Indonesia collects relatively little revenue as a share of GDP. However, to date, it has been challenging to estimate the share of formal firms that evade tax and the characteristics associated with higher evasion.
The research
Using novel experimental methods, we reveal both the scale of tax evasion by formal firms in Indonesia and provide insights into the characteristics associated with higher levels of evasion.
The impact
Our study suggests that the rate of tax evasion by formal firms in Indonesia translates into a revenue loss in the order of 2% of GDP. These findings helped to inform improvements in the algorithm used by the tax office in Indonesia to identify non-compliant firms.
Our researchers
Christopher Hoy - Melbourne Institute
Filip Jolevski and Anthony Obeyesekere - World Bank