Taxation-Federal Commons^™

Inferring Tax Compliance From Pass-Through: Evidence From Airbnb Tax Enforcement Agreements, Andrew J. Bibler, Keith F. Teltser, Mark J. Tremblay

Economics Faculty Publications

Tax enforcement is especially costly when market participants are difficult to observe. The benefits of enforcement depend crucially on pre-enforcement compliance. We derive an upper bound on pre-enforcement compliance from the pass-through of newly enforced taxes. Using data on Airbnb listings and the platform’s voluntary collection agreements, we find that taxes are paid on, at most, 24% of Airbnb transactions prior to enforcement. We also find that demand for Airbnb listings is inelastic, driving three key insights: the tax burden falls disproportionately on renters, the excess burden is small, and tax enforcement is relatively ineffective at reducing local Airbnb activity.