American Economic Journal: Economic Policy
no. 1, February 2023
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).
Bergolo, Marcelo, Rodrigo Ceni, Guillermo Cruces, Matias Giaccobasso, and Ricardo Perez-Truglia.
"Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment."
American Economic Journal: Economic Policy,
Firm Behavior: Empirical Analysis
Business Taxes and Subsidies including sales and value-added (VAT)
Tax Evasion and Avoidance
Firm Performance: Size, Diversification, and Scope
Industrialization; Manufacturing and Service Industries; Choice of Technology