This prediction is motivated by the fact that the tax authorities regularly follow up on rms with discrepancies between third-party and self-reports, leading most rms to report sales weakly larger than the third-party reported amounts (section V).

We thus conduct an event study of reported taxable income around the time of the rst information report about a rm, distinguishing reports by the dierent informing agents (other rms, state institutions, credit/debit card companies).<sup>38</sup> Of course, whether or not a rm becomes subject to information reporting is partly under the rm's control. A rm is nearly certain to be reported to the tax authorities if it sells to a state institution or conductes sales via a credit/debit card terminal, as state institutions and card companies are considered highly compliant with their reporting obligations. Conducting transactions with another rm above the relevant annual threshold amount should also trigger information reporting, although rms may be less compliant with their reporting obligations, and transacting partners may collude not report their transactions. An additional concern is that the event of becoming subject to information reporting may increase not only the share of true taxable income that is reported to the tax authorities, but also the level of true taxable income and hence of reported taxable income, even if the share of income that is reported remains unchanged. For instance, securing a government contract has been shown to increase rm growth (Ferraz et al 2016), and oering consumers the opportunity to pay by credit/debit card may allow rms to attract additional customers. While there are no credible estimates of the potential size of these demand eects, we discuss below why our estimates are unlikely to be fully driven by them. To adress the identication concerns, we consider the event group _E_ of rms that switch into information reporting coverage for the rst time at event time _k_ = 0 , and the event control group _C_ of rms which have not switched into coverage by _k_ = 0 _._ As a careful precaution, but without substantively modifying the core results, we follow Hilger (2014) and Naritomi (2015) in reweighting the control group to resemble the treatment group pre-event trend. For each event period, we estimate the rms' propensity score of switching into information reporting coverage.<sup>39</sup> Following DiNardo et al. (1996), we re-weight the control group by quintile bins of the propensity score to match the distribution of the event group. We consider the event's impact on income tax declarations and sales tax declarations. For the income tax, we consider a balanced panel of rms that we can

> 38The Costa Rican tax authorities, unlike the Internal Revenue Service in the United States, do not notify taxpayers about the informative reports received about them. However, given the structure of reporting requirements, each rm should be aware of the informative declarations held by the tax authorities about its business activities. Each interrm transaction above the relevant threshold amount needs to be reported by both the seller and buyer (declaration D151). State institutions and credit/debit card companies acting as withholding agents are obliged by law to provide taxpayers with a receipt stating the amount of tax withheld. Compliance with this information requiremetn is considered to be high.

> 39The propensity score of a rm receiving its rst informative declaration is estimated separately for each declaration type and event year, using rm type and tax administration dummies, and the two lags of a third-order polynomial of total income and taxable income. See also Yagan (2015) for a detailled description of the reweighting procedure.

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