National Tax Journal · 1992 · 531 citations · 19 references
LawAccountancyEconomicsAuditingExperimental EconomicsTaxationBehavioral Responses To TaxationCompliance ReportingTax AuditingTax AuditsTax ComplianceTax Information ReportingTax Compliance ReportingTax Rate Compliance Effects
Empirical studies of taxpayer compliance are hampered by a lack of detailed, reliable data on individual compliance choices. This study aims to estimate how taxpayers respond to changes in tax rates, penalties, audit rates, and government spending using laboratory experiment data. The authors conduct laboratory experiments where participants make tax reporting decisions under varying tax, penalty, audit, and expenditure conditions. Results show that higher audit and penalty rates modestly increase reporting, lower tax rates and receipt of benefits also raise compliance, but the magnitude of these effects is limited, confirming some but not all theoretical predictions and aligning quantitatively with prior empirical work.
The fundamental difficulty in empirical work on taxpayer compliance is the absence of detailed and reliable information on individual compliance choices. This paper uses data from laboratory experiments to estimate individual responses to tax, penalty, and audit rate changes, as well as to changes in government expenditures. The empirical results confirm some (although not all) theoretical predictions, and compare quantitatively with other empirical work. Taxpayer reporting increases with greater audit and penalty rates; however, these responses are not large. Compliance is also greater when individuals face a lower tax rate and when they receive something for their taxes.
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Income tax evasion: a theoretical analysis
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