Is the forgiveness of a tax amnesty divine? Evidence from Argentina

This paper studies the effect of a tax amnesty on subsequent property tax compliance in Argentina. Using individual-level tax data from an administrative panel, we compare taxpayers from a municipality that implemented an amnesty to taxpayers in unaffected neighboring municipalities as a control group. Applying a difference-in-differences approach, we find a slight increase in compliance following the amnesty. Taxpayers in the amnesty municipality exhibit a 2 percentage point rise in compliance compared to those in the control municipalities. The overall compliance increase consists of two components: (i) a significant and lasting improvement in compliance among taxpayers who enroll in an amnesty payment plan, and (ii) a minor increase in compliance among non-enrolled taxpayers. Enrollees' enhanced compliance is partially driven by a higher adoption of an alternative pay-in-advance method that facilitates compliance. We also analyze the selection patterns for amnesty participation and find that enrollees are wealthier and had somewhat higher compliance prior to the amnesty, indicating limited positive selection with regressive implications. In summary, tax amnesties can effectively encourage delinquents to return to compliance.