Munich Personal RePEc Archive (Ludwig Maximilian University of Munich) · 1996 · 86 citations · 0 references
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Public AffairsPublic FinancePublic PolicyAuditingExperimental DesignTaxationBehavioral Responses To TaxationTax AuditingTax AuditsTax ComplianceTax ReformTaxpayer AssistanceComplianceState Tax ReportingTax Compliance AuditsTax Compliance MeasurementTax Compliance MonitoringTax Compliance TestingTax Form DesignTaxpayer Compliance Assistance
The Minnesota Department of Revenue conducted the 1995 Income Tax Compliance Experiment to study tax compliance. The study aimed to test alternative strategies to boost voluntary compliance with the state's individual income tax. Forty‑seven thousand randomly selected taxpayers were assigned to strategies such as pre‑audit notice, enhanced services, informational letters, and a redesigned M‑1 form, and changes in federal taxable income and state taxes paid from 1993 to 1994 were compared to control groups. The analysis identified which strategies most effectively altered taxpayer behavior and which taxpayer groups were most responsive, earning the experiment the 1996 Federation of Tax Administrators Research Award.
This report describes the Minnesota Income Tax Compliance Experiment conducted by the Minnesota Department of Revenue in 1995. The experiment tested alternate strategies to improve voluntary compliance with the state's individual income tax. These strategies included: increased examination and auditing of returns with prior notice to taxpayers, enhanced services to taxpayers, information messages about tax compliance in two letters sent to taxpayers, and a redesigned state M-1 tax form. About 47,000 taxpayers participated in the experiment. They were selected by random chance for the compliance strategies. The primary measures used to evaluate compliance strategies were change in reported federal taxable income and change in state taxes paid from tax year 1993 to 1994. Changes in groups subject to a compliance strategy were compared to changes in similar groups of taxpayers who were unaffected by the experiment (control groups). Analysis of the results identified the strategies that had the greatest effect on changing taxpayers' behavior and the specific types of taxpayers who were most strongly affected. This experiment received the 1996 Research Award from the Federation of Tax Administrators.