This study uses a laboratory experiment to investigate the effect of tax audits on post-audit tax compliance. An important feature of our experimental design is the addition of audit ”effectiveness” to our audit mechanism, where effectiveness is defined as the share of undeclared income that...

Individuals whose income is not reported to the tax authority by a third party (e.g., the self-employed and those earning casual wages such as tips) may be less likely to be detected evading taxes relative to the case in which they are subject to third-party reporting. However, the compliance...

The rapid growth in online commerce has harmed state sales tax bases. However, the extent of this base reduction is difficult to estimate. In this paper we collect our own data from eBay.com on a "representative" commodity classification and a "typical" day. Our data consist of nearly twenty-one...

The traditional "enforcement" paradigm of tax administration views taxpayers as potential criminals, and emphasizes the repression of illegal behavior through frequent audits and stiff penalties. However, an important trend in tax administration policies in recent years is the recognition that...

The standard assumption underlying the incidence of tax evasion is that the beneficiaries are those who successfully evade their taxes. However, a general equilibrium process of adjustment should occur through changes in the relative prices of both commodities and factors of production as...

A significant amount of non-compliance with the personal income tax is due to individuals who have not filed a tax return and so who are not “in the system”. We use experimental laboratory methods to examine the effect of positive inducements for filing a tax return. Our design captures the...

This paper examines the effect of “empathy” and “sympathy” on tax compliance. We run a series of laboratory experiments in which we observe the subjects’ decisions in a series of one-shot Tax Compliance Games presented at once and with no immediate feedback. Importantly, we employ...

To determine the full effects of taxation on income distribution, policymakers need to consider the impacts of tax evasion. In the standard analysis of tax evasion, all the benefits are assumed to accrue to tax evaders. But tax evasion has other impacts that determine its true effects. As...

In this paper we give our perspective on the different paradigms that have shaped – and seem likely to shape in the future – research in the field of tax compliance behavior. These research paradigms include viewing tax evasion as a decision under risk made by a single taxpayer, as...

Taxpayers face well-known and well-identified individual motivations in their compliance decisions, motivations that originate with the standard economic model of tax evasion in which financial incentives are shaped by audit, penalty, and tax rates. However, there is growing evidence that these...