Performance-based wages in tax collection: The Brazilian tax collection reform and its effects

We use panel data from the Brazilian tax collection authority to examine th e effects of a major incentive reform instituted in 1989 to improve tax enf orcement. Beforehand, fine collections per inspection were relatively stabl e; however, a striking trend break occurred afterwards, which we attribute to the incentive reform not to changes in the macroeconomy or personal and corporate income tax rates. Our estimates suggest the growth in fines per i nspection after the reform is about 75% above what it would have been witho ut it and that there is substantial heterogeneity in the impact of the refo rm across tax regions.