Description:

Speaker: Giacomo Marcolin

Title: Tax Administration Quality and Firm Outcomes: Evidence from Tax Litigation

Abstract: This paper studies how the quality of local tax administration affects firms’ performance in a setting where the statutory tax system is common nationwide but enforcement is delegated to heterogeneous local offices. Using Italian data, we construct a measure of Tax Administration Quality (TAQ) based on the share of litigated tax cases won by each office, controlling for firm characteristics, case features, and court fixed effects. We document substantial dispersion in TAQ across local offices and, after a centralization reform, across provincial offices. To identify the effects of tax administration quality on firms, we compare firms located in municipalities at the borders of different local tax offices within a province, before and after a 2010 reform that merged local offices into provincial tax agencies. Linking TAQ to firm-level balance sheet data, we find that improvements in the quality of the assigned tax office lead to higher firm growth in assets and revenues.