Technology and tax compliance spillovers: Evidence from a VAT e-invoicing reform in Peru

Abstract

Our study uses administrative data on firm-to-firm transactions and quasi- experimental variation in the rollout of electronic invoicing reforms in Peru to study the diffusion of e-invoicing through firm networks and its effect on tax compliance. We find that voluntary e-invoicing adoption is higher amongst firms with partners who have been mandated to adopt e-invoicing, implying positive technology adoption spillovers. Spillovers are stronger from downstream partners and from export-oriented firms, consistent with incentives in the VAT system. Trading partners of firms who have been mandated to adopt e-invoicing report lower taxable purchases. Transaction-level data suggests that this decline comes from the termination of firm-supplier relationships. Lower purchases result in lower VAT credits, and higher VAT payments following the reform, suggesting positive tax compliance spillovers.