ESRI Discussion Paper Series No.366 Do the Self-Employed Underreport Their Income? Evidence from Japanese Panel Data
Abstract
This paper examines to what extent self-employed households underreport their income to tax authorities in Japan. To this end, we employ the so-called expenditure-based approach, which essentially compares the current expenditure of self-employed and wage earner households while controlling for their income, net worth, and household characteristics. Using Japanese household-level panel data for the period 2009−2019, we find that the self-employed possibly underreport their income by 33.0–36.4%. Our findings are also robust to the different preferences (degree of risk-loving, time discount rates, etc.), planned retirement age, and degree of measurement error in expenditure between the self-employed and wage earners.
Structure of the whole text(PDF-Format 1 File)
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1. Introductionpage2
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2. Institutional background and estimation strategypage4
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3. Datapage8
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4. Estimation resultspage10
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5. Robustness checkspage12
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6. Considerations on biases in 1-kpage19
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7. Conclusionpage20
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Referencespage21
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Appendixpage23
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