Transaction-Tax Evasion in the Housing Market

IEB Working Paper N. 2019/03

44 Pages Posted: 25 Apr 2019

See all articles by Jose G. Montalvo

Jose G. Montalvo

Universitat Pompeu Fabra

Amedeo Piolatto

Autonomous University of Barcelona; Barcelona Economics Institute (IEB); Barcelona Graduate School of Economics (Barcelona GSE)

Josep Raya

Universitat Pompeu Fabra

Date Written: March 26, 2019

Abstract

We model the behaviour of a buyer trying to evade the real estate transfer tax. We identify over-appraisal as a key, easily-observable element that is inversely related with tax evasion. We conclude that the tax authority could focus auditing efforts on low-appraisal transactions. We include ‘behavioural’ components (shame and stigma) allowing to introduce buyers' (education) and societal (social capital) characteristics that explain individual and idiosyncratic variations.

Our empirical analysis confirms the predictions using a unique database, where we directly observe: real payment, value declared to the authority, appraisal, buyers' educational level and local levels of corruption and trust.

Keywords: Transfer Tax, Tax Evasion, Second-Hand Housing Market, Overappraisal, Loan-To-Value, Corruption, Social Capital, Stigma, Shame, Education

JEL Classification: G21, H26, R21

Suggested Citation

Montalvo, Jose G. and Piolatto, Amedeo and Raya, Josep, Transaction-Tax Evasion in the Housing Market (March 26, 2019). IEB Working Paper N. 2019/03, Available at SSRN: https://ssrn.com/abstract=3360356 or http://dx.doi.org/10.2139/ssrn.3360356

Jose G. Montalvo

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
08005 Barcelona
Spain

Amedeo Piolatto (Contact Author)

Autonomous University of Barcelona ( email )

Department of Economics and Economic History
Edifici B - Campus Bellaterra
Barcelona, 08193
Spain

HOME PAGE: http://https://sites.google.com/site/piolatto/

Barcelona Economics Institute (IEB) ( email )

c/ John M. Keynes, 1-11
Barcelona, 08034
Spain

HOME PAGE: http://https://sites.google.com/site/piolatto/

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Josep Raya

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

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