Kasper, M. and Rablen, M. orcid.org/0000-0002-3521-096X (2023) Tax compliance after an audit: higher or lower? Journal of Economic Behavior & Organization, 207. pp. 157-171. ISSN 0167-2681
Abstract
What is the compliance effect of experiencing a tax audit? Empirical studies typically report a positive effect, while laboratory experiments frequently report a negative effect. We show experimentally that whether a tax audit increases or decreases subsequent compliance hinges on the balance of learning opportunities, misperception of audit risk, and the confounding effect of censoring. After an audit, taxpayers lower their perceived risk of audit – consistent with a bomb-crater effect – when audit selection is exogenous. However, for an endogenous audit rule under which taxpayers can learn to reduce their audit risk by reporting higher income, learning effects outweigh probability misperception, resulting in an increase in post-audit tax compliance. Finally, we show that accounting for censoring effects can eliminate on its own the negative post-audit compliance effect frequently observed in laboratory experiments.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2023 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/) |
Keywords: | Tax audits; probability misperception; learning; endogenous audit rules; censoring; uncertain audit probability; tax evasion game |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 10 Oct 2022 15:15 |
Last Modified: | 26 Jan 2023 12:46 |
Status: | Published |
Publisher: | Elsevier |
Refereed: | Yes |
Identification Number: | 10.1016/j.jebo.2023.01.013 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:191852 |