Influence of Accountability and Penalty Awareness on Tax Compliance

Abstract

ABSTRACT: The Washington State Department of Revenue conducted a behavioral field experiment to increase use tax compliance within the construction industry. The study examined the effects of accountability and heightened sanction awareness on tax compliance. The results indicate that mandating firms to file an affidavit signed by the party responsible for reviewing use tax obligations increases compliance. Providing information regarding the penalty structure for noncompliance through an educational letter also increases use tax compliance, especially for firms with declining revenues. This latter finding is consistent with the findings of Jackson and Hatfield (2005). These results add to taxation literature by finding that inexpensive affidavits and mail-based education regarding tax sanctions can be effective.