Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data

Abstract This paper explores the relationship between tax rates and evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, we are able to provide an analysis that is largely comparable with rest of literature while also introducing two important innovations. First, compare elasticity statutory effective (ETRs). Most studies so far focused on former. We show ETRs most relevant parameter explain contexts where exemptions widespread, which results large divergence set out law. Second, account for costs more precisely than previous by adjusting gap rather controlling proxies. argue this new approach accounting superior those previously adopted literature.