【主题】Misreporting Responses to Housing Transaction Tax Notch in China
In China, for second-hand housing transactions, a business tax is levied on reported housing transaction prices once prices are above a certain threshold. Thus, reported prices rather than true prices should respond to the tax notch, creating an incentive for misreporting. We use a unique large dataset that includes both true and reported prices of second-hand housing transactions, which allows us to directly study the misreporting behavior. We document a novel three-segment misreporting pattern against true prices, which is remarkably consistent with the predictions of a simple tax evasion model. Data allow us to test against alternative forms of misreporting cost function. The rich heterogeneity of misreporting patterns is consistent with a misperception interpretation rather than alternative explanations.