Informality and tax evasion. An experimental test among female entrepreneurs in Bogotá

Abstract

The majority of informal entrepreneurs and workers in Bogota are women, most of whom do not have social security provision or job stability.This research investigates to what extent female entrepreneurs in the city of Bogota, Colombia, prefer to situate their business in the informal labor market. Some theorists as represented by De Soto, argue informality occurs due to a preference-based rational decision to avoid paying taxes, while others consider it to be primarily related to an “escape” from poverty as a unique option. The study used an experiment, featuring a tax evasion game targeting500 women participants, formal and informal entrepreneurs, from the city of Bogota. The null hypothesis of the study was tested using Chi-square (X2) and inferential statistical model at a 5% level of significance. The findings revealed that a significant difference between attitudes towards taxation in formal and informal female entrepreneurs in Bogota does not exist.