AMAZING GRACE: TAX AMNESTIES AND COMPLIANCE

TLDR

The study investigates whether a tax amnesty raises or lowers compliance over time using experimental methods. The authors employ experimental methods to assess the long‑run impact of a tax amnesty. Compliance falls after an amnesty, but a well‑designed amnesty combined with increased enforcement can raise aggregate compliance and ease the transition to a tougher tax regime.

Abstract

Does a tax amnesty raise or lower compliance over time? This paper uses experimental methods to analyze the long run impact of an amnesty. The results indicate that the average level of compliance falls after an amnesty. However, a well-designed amnesty may be able to overcome this decline. If post-amnesty enforcement efforts increase, then aggregate compliance actually increases. In fact, post-amnesty compliance is higher when an amnesty is accompanied by increased enforcement efforts than when enforcement increases without an amnesty. An amnesty may therefore be an effective tool for easing the transition to a tougher tax regime.