The Brazilian tax collection and the ratchet effect
Guedes, Kelly Pereira
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This thesis analyses the ratchet effect in the context of the performance scheme implemented by Brazilian tax collection in 1988 to reward tax officials for their effort in collecting taxes and uncovering tax violations, using panel data for 110 tax agencies from August 1989 to April 1993 and employing the GMM-system estimator. The estimates suggest the presence of ratchet effect, i.e., the more the tax officials do today, the more the tax officials are asked to do in the future. This result endangers the credibility of the Brazilian tax authority's incentive program as an incentive system.