Revealing tax evasion: Experimental evidence from a representative survey of Indonesian firms

This paper examines the pervasiveness of tax evasion among firms in Indonesia and the characteristics
associated with higher levels of noncompliance. Tax evasion is estimated through a randomized, double-list
experiment embedded in a nationally representative survey of 2,955 registered firms. This revealed whether
firms pay all the taxes they owe without them having to disclose this directly. Across both list experiments,
around a quarter of the firms indirectly reveal that they have evaded taxes. Firms that do not export, face
intense competition from informal firms, and believe tax administration is a major obstacle to their business
are the most likely to evade taxes. These findings help to inform the enforcement activities of tax authorities
in middle-income countries, which face substantial challenges in estimating levels of tax evasion and
identifying noncompliant taxpayers.