The Effect of Taxpayer Service Provision on Tax Compliance for Large Taxpayers in Jamaica

This research examines the effect of the provision of taxpayer services on filing and payment of the corporate income tax (CIT) and general consumption tax (GCT) for large taxpayers in Jamaica. We focus on the taxpayer’s decision to file and pay taxes conditional on their reporting decision. These are important margins of response particularly in developing countries with relatively weak tax administrations that find it difficult to collect reported taxes. The empirical strategy adopts a regression discontinuity design (RDD) that exploits an exogenous jump in the intensity of taxpayer service delivery, which occurs when a taxpayer reaches gross receipts of J$500 million (US$5.7 million) and is selected into the large taxpayer office (LTO). The results indicate null effects for the CIT but positive filing and payment compliance effects for the GCT. The contrasting results for the CIT and GCT may be due to the relatively weaker legal enforcement framework of the former. The results provide suggestive evidence of a complementarity between the strength of the legal enforcement framework of the taxing regime and the provision of taxpayer services.