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A typology of tax compliance in developing economies: Empirical evidence from China's shoe industry
Author(s)
Date Issued
2019
Journal
ISSN
0265-8240
1467-9930
Citation
Law & Policy, 2009, Vol. 41(2), pp. 242-266.
Type
Peer Reviewed Journal Article
Abstract
Drawing on fieldwork investigations of shoe manufacturers in southeastern China, this article provides empirical evidence for understanding these businesses’ taxpaying practices. We find that since business taxpayers largely regard tax law as illegitimate, instrumental considerations dominate these taxpayers’ decisions to pay or not pay taxes. We then incorporate “structural opportunities for evasion” and “perceived costs of evasion” to develop a two-by-two matrix to understand the following types of behavior: aggressive evasion, obliged compliance, strategic compliance, and reciprocal compliance. We argue that this matrix explains why value added tax fraud is widespread in China while voluntary compliance is rare. It also helps to illuminate compliance more generally in developing economies.
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