"Value Added Taxes, Chain Effects and Informality", by Aureo de Paula and Jose Scheinkman, was published as Penn Institute for Economic Research Working Paper n. 09-041. They investigates determinants of informal economic activity, using a survey of 48,000 small firms in Brazil. "… When we look at sectors where Brazilian firms are not subject to the credit system of value added tax, but instead the value added tax is applied at some stage of production ar a rate that is estimated by the tax authorities, this chain effect vanishes."
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