The project analyses the effects of size-dependent tax enforcement on firm's tax compliance. The empirical analysis, uses data from financial statements that Spanish firms must submit by law to the Commercial Registry ("Registro Mercantil"). The Banco de España compiles and digitises this information since 1995, creating a confidential administrative dataset. This dataset contains firm-level information on annual net operating revenue, input expenditures, number of employees, payroll taxes, total value added, and the tax base and liability in the corporate income tax, making it possible to analyze multiple margins of firms’ responses to the tax enforcement threshold. The dataset covers more than 80% of registered businesses in Spain with operating revenue between 3 and 9 million euros (the relevant range in our analysis) for the period 1995-2007, during which the LTU threshold remained constant at 6 million.

Uses data from financial statements that Spanish firms must submit by law to the Commercial Registry (Registro Mercantil) and also report to the tax authority. The data is available from 1995 when compilation officially started. It has a panel structure covering more than 80% of registered businesses in Spain with operating revenue between 3 and 9 million euros for the period 1995-2007. Among reporting firms, the “Banco de España” dataset identifies some firms as having “unreliable data”, often because of rounding issues or inconsistent reporting. We drop these firms (about 7% of the total) and obtain a final dataset of 285,570 firms with reported revenue between 3 and 9 million euros in the period 1995-2007.