Combatting Tax Evasion and Increasing Financial Transparency in the Time of COVID19: The Case of Paraguay
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Reducing tax evasion is one of the main objectives of countries, especially less developed countries with fewer resources. The literature has studied various tools to deal with tax evasion, but the results have been inconclusive. In addition, most of the evidence comes from developed countries. To contribute to addressing this gap, this study presents evidence on the impact of audit programs on the reduction of tax evasion in Paraguay. Using the synthetic difference-in-differences methodology, the study evaluates the effect of the audits on declared sales, the reduction of purchases, and the payment of taxes by firms during the 20182019 period. In addition, results are presented on the use of a tax dashboard that identifies discrepancies in declarations by firms. The findings show that the audits are effective in addressing tax evasion, and that the dashboard can orient criteria for more efficient fiscal control, which is particularly important during the time of COVID 19. It is thus shown that in less developed countries, governmental auditing activities are key to improving tax collection.