Sales tax enforcement: An empirical analysis of compliance enforcement methodologies and pathologies

Most research on tax evasion has focused on the income tax. Sales tax evasion has been largely ignored and dismissed as immaterial. This paper explored the differences between income tax and sales tax evasion and demonstrated that sales tax enforcement is deserving of and requires the use of different tools to achieve compliance. Specifically, the major enforcement problem with sales tax is not evasion: it is theft perpetrated by companies that act as collection agents for the state. Companies engage in a principal-agent relationship with the state and many retain funds collected as an agent of the state for private use. As such, the act of sales tax theft bears more resemblance to embezzlement than to income tax evasion. It has long been assumed that the sales tax is nearly evasion free, and state revenue departments report voluntary compliance in a manner that perpetuates this myth. Current sales tax compliance enforcement methodologies are similar in form to income tax compliance enforcement methodologies and are based largely on trust. The primary focus is on delinquent filers with a very small percentage of businesses subject to audit. As a result, there is a very large group of noncompliant businesses who file on time and fly below the radar while stealing millions of taxpayer dollars. ^ The author utilized a variety of statistical methods with actual field data derived from operations of the Southern Region Criminal Investigations Unit of the Florida Department of Revenue to evaluate current and proposed sales tax compliance enforcement methodologies in a quasi-experimental, time series research design and to set forth a typology of sales tax evaders. This study showed that current estimates of voluntary compliance in sales tax systems are seriously and significantly overstated and that current enforcement methodologies are inadequate to identify the majority of violators and enforce compliance. Sales tax evasion is modeled using the theory of planned behavior and Cressey’s fraud triangle and it is demonstrated that proactive enforcement activities, characterized by substantial contact with non-delinquent taxpayers, results in superior ability to identify noncompliance and provides a structure through which noncompliant businesses can be rehabilitated.^

On the Regulation of Small Actors: Three Experimental Essays about Policies based on Voluntary Compliance and Decentralized Monitoring

Monitoring and enforcement are perhaps the biggest challenges in the design and implementation of environmental policies in developing countries where the actions of many small informal actors cause significant impacts on the ecosystem services and where the transaction costs for the state to regulate them could be enormous. This dissertation studies the potential of innovative institutions based on decentralized coordination and enforcement to induce better environmental outcomes. Such policies have in common that the state plays the role of providing the incentives for organization but the process of compliance happens through decentralized agreements, trust building, signaling and monitoring. I draw from the literatures in collective action, common-pool resources, game-theory and non-point source pollution to develop the instruments proposed here. To test the different conditions in which such policies could be implemented I designed two field-experiments that I conducted with small-scale gold miners in the Colombian Pacific and with users and providers of ecosystem services in the states of Veracruz, Quintana Roo and Yucatan in Mexico. This dissertation is organized in three essays.

The first essay, “Collective Incentives for Cleaner Small-Scale Gold Mining on the Frontier: Experimental Tests of Compliance with Group Incentives given Limited State Monitoring”, examines whether collective incentives, i.e. incentives provided to a group conditional on collective compliance, could “outsource” the required local monitoring, i.e. induce group interactions that extend the reach of the state that can observe only aggregate consequences in the context of small-scale gold mining. I employed a framed field-lab experiment in which the miners make decisions regarding mining intensity. The state sets a collective target for an environmental outcome, verifies compliance and provides a group reward for compliance which is split equally among members. Since the target set by the state transforms the situation into a coordination game, outcomes depend on expectations of what others will do. I conducted this experiment with 640 participants in a mining region of the Colombian Pacific and I examine different levels of policy severity and their ordering. The findings of the experiment suggest that such instruments can induce compliance but this regulation involves tradeoffs. For most severe targets – with rewards just above costs – raise gains if successful but can collapse rapidly and completely. In terms of group interactions, better outcomes are found when severity initially is lower suggesting learning.

The second essay, “Collective Compliance can be Efficient and Inequitable: Impacts of Leaders among Small-Scale Gold Miners in Colombia”, explores the channels through which communication help groups to coordinate in presence of collective incentives and whether the reached solutions are equitable or not. Also in the context of small-scale gold mining in the Colombian Pacific, I test the effect of communication in compliance with a collective environmental target. The results suggest that communication, as expected, helps to solve coordination challenges but still some groups reach agreements involving unequal outcomes. By examining the agreements that took place in each group, I observe that the main coordination mechanism was the presence of leaders that help other group members to clarify the situation. Interestingly, leaders not only helped groups to reach efficiency but also played a key role in equity by defining how the costs of compliance would be distributed among group members.

The third essay, “Creating Local PES Institutions and Increasing Impacts of PES in Mexico: A real-Time Watershed-Level Framed Field Experiment on Coordination and Conditionality”, considers the creation of a local payments for ecosystem services (PES) mechanism as an assurance game that requires the coordination between two groups of participants: upstream and downstream. Based on this assurance interaction, I explore the effect of allowing peer-sanctions on upstream behavior in the functioning of the mechanism. This field-lab experiment was implemented in three real cases of the Mexican Fondos Concurrentes (matching funds) program in the states of Veracruz, Quintana Roo and Yucatan, where 240 real users and 240 real providers of hydrological services were recruited and interacted with each other in real time. The experimental results suggest that initial trust-game behaviors align with participants’ perceptions and predicts baseline giving in assurance game. For upstream providers, i.e. those who get sanctioned, the threat and the use of sanctions increase contributions. Downstream users contribute less when offered the option to sanction – as if that option signal an uncooperative upstream – then the contributions rise in line with the complementarity in payments of the assurance game.

Comply-or-explain in Sweden : A study on the quality of non-compliance explanations

Purpose: The purpose of this study is to examine the effectiveness of the comply-or-explain principle in Sweden to determine if the flexible approach is functioning as in-tended. Research design: This paper scrutinizes the quality of the explanations with respect to the Swedish Corporate Governance Code. A quantitative research with a cross-sectional design has been performed and the data collection covers 241 companies listed on Nasdaq OMX Stockholm for the fiscal year of 2014. The secondary data has been gathered from corporate governance reports of the researched companies and analysed by using a tax-onomy of explanations. Findings: The report demonstrates that the comply-or-explain principle in Sweden is effective. A clear majority of the explanations, 71,8%, were deemed as informative, mean-ing that a large proportion of the Swedish firms are utilizing the flexible approach in an effective manner. However, one out of four explanations were classified as insufficient and we have thus provided recommendations in order for the code to become even more effective. Contribution: Our findings provide insights on how the comply-or-explain principle works in a country that is supposed to be a leading example of how the comply-or-explain approach should be implemented. This study should be of significance for policy makers considering that we have outlined how the principle works and provided recommenda-tions on how the Swedish Corporate Governance Code can be improved. Value: Our findings demonstrate that companies listed on Nasdaq OMX Stockholm pro-vide high quality explanations that can serve as an inspiration for companies listed in other countries. Furthermore, the results indicate that managers are likely to act within ethically desired norm. Considering the social implications, as Swedish firms are informative in terms of explanations, it minimizes the risk of firms acting dishonestly.

Psychosocial stressors perceived in the process of social reintegration and compliance time remaining in prison sentence

Introduction: This study shows the results obtained from evaluating the main psychosocial stressors perceived in the process of social reintegration and their relation to a remaining sentence time in prison. Material and methods: A questionnaire based on an ad hoc design was administered, using a Likert scale, with a total of 383 inmates serving sentences in southeast Spain. Results: Findings show that inmates with a remaining sentence period of more than one year, like those who had served more than a year of their sentence, showed greater concern about possible economic difficulties. Conclusions: The psychosocial stressors studied might provide relevant information to facilitate the process of social reintegration after the completion of a prison sentence.

Factors influencing compliance to universal precautions in healthcare workers: a systematic literature review

Background: Occupational exposure to blood borne viruses involving hollow bore needles is one of the most commonly reported adverse events affecting staff in the National Health Service in the UK. Universal Precautions Guidelines were originally developed in 1987 in order to minimise the risk of contact with body fluid. Universal precautions not only protect staff against blood borne pathogens but are also considered as an efficient mean to reduce the spread of pathogens from patients to patients via healthcare workers.Aim of the study: The aim of this study was to identify and evaluate the objective evidence on factors influencing healthcare workers compliance to universal precautions through a systematic literature review.Methodology: This systematic review was conducted in 2009 and studies were retrieved through electronic databases, manual journal searches and communications with experts in the field. Studies of cross sectional survey design and observational design were included in the review as they constituted the most commonly used research design evaluating compliance to universal precautions.A quality checklist was developed based on existing assessment criteria.Findings: Studies conducted to ascertain compliance to universal precautions are plentiful but remain of low quality. Sixty studies were retrieved and evaluated for potential inclusion in this study. Four studies met the inclusion criteria. Three were of cross-sectional survey design and one of direct observational design.Conclusions: Uptake of universal precautions remains low despite known benefits. Lack of time, resources and lack of knowledge have been shown as being factors negatively influencing healthcare workers compliance with universal precautions.This paper also highlights the issues surrounding the inclusion of low grade evidence in systematic literature reviews and the implications of reviews including low grade evidence on practice.Type of article: Research paperKeywords: systematic review, universal precautions, standard precautions, compliance, healthcare worker.

A biomechanically optimized knitted stent using a bio-inspired design approach

Vascular implants have always been a key area of research in medical textiles. Knitted structures have been proven to be suitable for stent applications on the basis of their looped mesh geometry, structural flexibility and ease of manufacturing. However, there are biomechanical constraints of plain knit constructions that can result in clinical complications after implantation and hence cannot be ignored. This study reports a new segmented knit design inspired by structural metamerism observed in the body design of some invertebrate animals. Metamerism is the phenomenon of having a linear series of body segments fundamentally similar in structure, but assigned to perform different functions. It was hypothesized that utilization of this simple and yet effective biological design approach in stent construction could improve the degree of control for optimizing stent biomechanical properties. The proposed segmented stent was constructed by incorporating an elastic filament component into a polyethylene terephthalate knitted stent at specific intervals along its length, also known as the ‘Plating Technique’. This technique generates a structure with alternately arranged stiff and elastic knitted sections which equip the stent with vital structural support and volumetric compliance properties, respectively. The stent design parameters (filament diameter, loop length, segmentation plan) were optimized to achieve significantly better biomechanical performance (bending flexibility, compression resistance, volumetric expansion, longitudinal extensibility) than a plain knit stent.