Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment
American Economic Journal: Economic Policy
vol. 15,
no. 1, February 2023
(pp. 110-53)
Abstract
The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with a tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than US$200 million in taxes per year. We find that providing information about audits significantly affected tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972).Citation
Bergolo, Marcelo, Rodrigo Ceni, Guillermo Cruces, Matias Giaccobasso, and Ricardo Perez-Truglia. 2023. "Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment." American Economic Journal: Economic Policy, 15 (1): 110-53. DOI: 10.1257/pol.20200321Additional Materials
JEL Classification
- C93 Field Experiments
- D22 Firm Behavior: Empirical Analysis
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion and Avoidance
- K34 Tax Law
- L25 Firm Performance: Size, Diversification, and Scope
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
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