Tax compliance after an audit: Higher or lower?

Kasper, Matthias; Rablen, Matthew D.

doi:10.1016/j.jebo.2023.01.013

Cited by 9 publications

(4 citation statements)

References 47 publications

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“…Finally, we explore the e↵ects of audits on post-audit rule compliance (Kasper and Alm, 2022a,b). In line with recent work (Kasper and Rablen, 2023), we find that experiencing an audit reduces compliance in the subsequent round. However, this decline in post-audit compliance is conditional on pre-audit compliance levels (Table 3, Figure 5).…”

Section: Rule Compliancesupporting

confidence: 91%

Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust

et al. 2023

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Section: Rule Compliancesupporting

confidence: 91%

Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust

et al. 2023

View full text Add to dashboard Cite

“…Hence, they are likely to increase their perceived probability of being audited again if they interpret an audit as a sign of specific attention devoted to them by the tax authority (Hashimzade et al, 2013). 1 This was also reproduced in a laboratory experiment by Kasper and Rablen (2022), in which audits targeting taxpayers with the lowest levels of compliance result in them raising their compliance.…”

Section: Introductionmentioning

confidence: 92%

Predicting the deterrence effect of tax audits. A machine learning approach

Rabasco

Battiston

2023

Metroeconomica

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We apply machine learning methods to the prediction of deterrence effects of tax audits. Based on tax declarations data, we predict the increase in future income declarations after being targeted by an audit. We find that flexible models, such as classification trees and ensemble methods based on them, outperform penalized linear models such as Lasso and ridge regression in predicting taxpayers more likely to increase their declarations after an audit. We show that despite the non-randomness of audits, their specific time structure and the distribution of changes in declared amounts suggest a causal interpretation of our results; that is, our approach detects a heterogeneity in the reaction to a tax audit, rather than just forecasting an unconditional future increase. We find that taxpayers identified by our model will on average increase their declared income by €14,461-the average among all audited taxpayers being €−205. Our approach allows the tax agency to yield significantly larger revenues by appropriately targeting tax audit.

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“…This result may be due to ineffective audits or audits that fail to detect a taxpayer's noncompliance, which can reduce post-audit tax compliance (Kasper and Alm 2022). Other studies using laboratory experiments find that randomly selected taxpayers tend to decrease their tax compliance in the subsequent reporting decision, a phenomenon known as the "bomb crater effect" (Guala and Mittone 2005;Mittone 2006), an effect that appears to be driven by the misperception of the risk of a subsequent audit when the audit selection is random (Kasper and Rablen 2023).…”

Section: Increasing Tax Compliance Using Audits and Finesmentioning

confidence: 99%

“…Non-financial, or "collateral" sanctions (Blank 2014), such as the revocation of driving licenses and the denial of passports to tax evaders, have also been suggested as ways to improve compliance, and a recent study by Organ et al (2022) for the U.S. estimates that limiting passport access for taxpayers with significant tax debts has a positive effect on compliance. Nevertheless, it is increasingly recognized that more enforcement does not always translate into more tax compliance (Alm and Kasper 2023;Beer et al 2020;Kasper and Alm 2022;Kasper and Rablen 2023;Lancee et al 2023). Indeed, much of the recent research indicates that tax compliance cannot be achieved solely with the threat of penalties and sanctions, and in some circumstances, more audits may actually lead to less compliance.…”

Section: Introductionmentioning

confidence: 99%

Nudges, Boosts, and Sludge: Using New Behavioral Approaches to Improve Tax Compliance

Alm,

Burgstaller,

Domi

et al. 2023

Economies

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This paper discusses current developments in tax compliance research, with a focus on three aspects. First, we summarize empirical evidence on the traditional deterrence or enforcement approach, suggesting that tax audits and fines for noncompliance are critical in taxpayers’ compliance decisions. However, recent research indicates that the effects of deterrence are more nuanced than initially thought, suggesting that other interventions are needed to improve tax compliance. Second, therefore, we discuss research on behavioral approaches to increase tax compliance, starting with research that analyzes the effects of “nudges”, or interventions that use behavioral economics to alter the ways in which the choice architecture facing individuals is communicated to them by the tax administration. As applied to tax compliance, we conclude that nudges have had mixed effects on increasing tax compliance, suggesting that the specific design and implementation of these interventions determine their effectiveness. Third, we extend our discussion to other behavioral economics interventions that have not yet been studied widely in tax compliance research. These include “sludge”, or institutional features that complicate compliance, and “boosts”, or initiatives that target individuals’ competencies and thereby help them to make better decisions. Our central argument is that all three of these behavioral interventions should be utilized in the design of tax policies. However, for these methods to effectively complement traditional deterrence approaches, tax administrations should evaluate them before implementing them in the field. Closer cooperation between administrators and academics should thus be facilitated and encouraged.

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Tax compliance after an audit: Higher or lower?

Cited by 9 publications

References 47 publications

Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust

Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust

Predicting the deterrence effect of tax audits. A machine learning approach

Nudges, Boosts, and Sludge: Using New Behavioral Approaches to Improve Tax Compliance

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