Replication Data for: The impact of local corruption on business tax registration and compliance: Evidence from Vietnam

This paper studies how corruption affects two fundamental dimensions of a firm’s tax compliance: the likelihood of tax registration (possession of a tax ID) and the tax com- pliance ratio (the ratio between the firm’s tax payment and revenue). We explore a census covering all Vietnamese household businesses and leverage the differential expo- sure to corruption, depending upon which province similarly situated businesses are lo- cated within. Comparing household businesses in contiguous commune pairs that straddle provincial borders, we discover two seemingly contradictory results. We find that a house- hold business that operates in a more corrupt province is more likely to possess a tax ID, even though it does not necessarily pay more in taxes. In fact, among firms that possess tax IDs, an increase in corruption is associated with a decrease in the tax compliance ratio. We suggest a plausible explanation for this pattern is that corrupt bureaucrats encourage tax-ID possession, because the registration form provides them with better business infor- mation to extract bribes. This mechanism implies that an increase in corruption should be associated with a smaller increase in tax-ID possession among more “visible”businesses. We test and find supporting empirical evidence for this prediction.