for the sales tax in the most recent period considered (solid lines). This is despite the fact that we consider payments made until April 2015, the payment deadline for scal year 2014. There are two potential explanations for this downward sloping prole of the average payment rate: a fall in payment compliance over time, and the presence of late-payers. If taxpayers service their tax obligations with substantial delays, then more recent periods will display lower payment compliance than earlier periods, for which a longer series of payment data is available.

To distinguish these two explanations, we add the average payment proles based on payments made until April 2013 and April 2011 respectively (dashed and dotted lines). These payment proles are similarly downward sloping and shifted to the left, suggesting that payment delays are indeed at play. For instance, while the income tax payment share for 2010 is about 88% when measured by April 2011, it is above 95% when measured in April 2015. A small share of taxpayers thus pay with large delays. This is consistant with anedotal evidence that cash-constrained rms make tax payments when they are liquid rather than when the payment is due, as nes and interest fees are small.<sup>30</sup> At the same time, the payment share, as measured by the period-specic payment deadline, is also decreasing over time, from 88% for the income tax in 2010 to 81% in 2014. This suggests that payment compliance has also fallen over time. Overall, however, payment compliance is relatively high, not only across rms, but especially in the aggregate. As non-payers and late-payers are disproportionately small, the aggregate payment rate, that is the sum of payments divided by the sum of nal liabilities, is close to 100% soon after the payment deadline and stable over time.<sup>31</sup> Although the enforcement of outstanding payments through administrative and judicial procedures is part of the regular activities of the tax authorities in Costa Rica, and important from a deterrence perspective, increasing enforcement on this margin is unlikely to increase tax revenue substantially.

To summarize, the anatomy of compliance allows the following conclusions. First, a substantial share of rms fail to le their taxes, and there are limits to the extent to which third-party information induces compliance on the extensive margin. Second, a non-neglegible share of rms under-report sales compared to third-party reports, despite the fact that the authorities systematically cross-check tax returns and informative declarations and request corrections of discrepancies. Finally, a group of predominantly small rms pay their outstanding liabilities with several years of delay. While compliance gaps are present on all margins, they are relatively modest compared to total tax revenue. As evidence from a ling intervention and desk audits show, increased enforcement

> 30The payment rate seems to be lower for corporations than for the self-employed, but this is likely driven by a small number of missing payment records. Our current data does not contain payments led through a special online platform which is mainly used by large taxpayers. To ensure that our main results on the causal impact of withholding are not driven by gaps in the payment data, we conduct a series of robustness checks explained below and displayed in the appendix.

> 31Results available upon request.

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