Tax Evasion and Inflation - Evidence from the Nota Fiscal Paulista Program

Advisor: Marcelo Medeiros

This dissertation studies indirect effects of anti-tax evasion initiatives on consumer prices. Using the Nota Fiscal Paulista Program (NFP,0), implemented in the state of São Paulo in October 2007, I use counterfactual synthetic analysis to investigate the program's impact on 9 in inflation groups. I use as potential comparison units all other states for which consumer in inflation data are available. I report a signifficant effect of the NFP on food outside home (FOH) in inflation, especially meal prices. One year after the implementation of the program, FOH prices were 5% higher in São Paulo in comparison with the synthetic counterfactual. By September 2009, FOH prices were 6.5% higher in São Paulo than in the synthetic comparison unit. These results are closely related to the evolution of the NFP in terms of distributed tax rebates and number of participants. Among the other 8 in inflation groups I study, I find no signifficant effects on prices. In fact, strikingly good performances of the synthetic counterfactuals among some of those groups (especially meat and construction materials prices) suggest no impact at all from the program on prices.