rates between 15 - 25%, including an exemption threshold: any income below that level is not subject to PIT and also does not trigger withholding requirements. The exemption threshold throughout the period we study was typically set at around one and a half times the corresponding annual minimum wage, and this mostly defines the population for whom we observe labor and mixed income in this data-source.<sup>5</sup> Unlike in other countries, individuals whose income is entirely withheld at source, such as capital income and wages, are not required to file the yearly PIT declaration. Income tax declarations are only required when individuals earn income that is not withheld at source, such as some forms of service provision and income from nonincorporated commercial enterprises. In order to assign income to individuals, we use both self-declared information on PIT declarations as well as third-party information through withholding mechanisms.

We use datasets at the taxpayer level for each year in the period 2003-2019, including all possible income sources observed by the tax authority. Recovering information from several different data sources within the tax administration is possible since taxpayers are uniquely identified in all datasets using a personal identification number (RTN, for _Registro Tributario Nacional_ in Spanish).

We present a summary of taxpayer-level data availability in Table 1 where we highlight the following facts. First, the maximum number of individuals observed in the tax data is approximately 650,000 in 2019, representing less than 15 percent of the estimated adult population in that year. That is a direct result of the high levels of informality and of the high exemption rate for PIT, among other things.<sup>6</sup> As discussed below, even in those years we only use a fraction of the administrative data to complement survey observations, since many of these observations in the tax data have very low incomes (e.g., only small declared amounts from interest in bank accounts). Second, information from withholding sources is very important: in 2019, for example, only 116,000 taxpayers filed the yearly income tax declaration. For all the other taxpayers observed in our data, some type of withholding allowed us to observe their income. Third, the total number of taxpayers observed each year steadily rose in the period, in part due to the increase in the yearly tax filing: it rose from less than 25,000 declarations in 2003 to over 130,000 in 2018 – the decrease in 2019 is likely driven by the effects of the Covid-19 pandemic.<sup>7</sup> Furthermore, 2011 marks a change in the avail-

> 5In 2019, for example, taxpayers with annual income below L 158,995 were exempt, whereas the average annual minimum wage was approximately L 113,000. The exemption threshold in Honduras is particularly high when compared to other countries in the region, as documented by Bergolo _et al._ (2023).

> 6Higher-income Latin American countries such as Chile and Uruguay have much lower informality rates and consequently tax data covers a vast swath of the total population (see Flores _et al._ (2020) and Burdin _et al._ (2014)).

> 7Since the lockdown in the country started in March 2020 and the deadline to file income taxes was postponed several times, from April initially to July and finally August.

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