The Internal Revenue Service (IRS) is the federal agency charged with tax revenue collection. In fiscal year 2020, the IRS collected $3.5 trillion in taxes, which represented about 96 percent of aggregate annual federal funding (IRS, 2020). In its mission statement the IRS states that its...

Tax audits are the main tool adopted by tax administrations to collect taxes. Their optimal number depends on two parameters, i.e. the enforcement elasticity of tax revenue with respect to the audit effort and the sum of private compliance costs and public administrative costs entailed by...

Tax audits are the main tool adopted by tax administrations to collect taxes. Their optimal number depends on two parameters, i.e. the enforcement elasticity of tax revenue with respect to the audit effort and the sum of private compliance costs and public administrative costs entailed by...

This study examines the relation between risk-based tax audit strategies and corporate tax avoidance. We exploit OECD data across 54 countries on risk profiling, predictive modeling, and internal intelligence functions in tax administrations from 2014 to 2017 to investigate whether risk-based...

I document an important tax collection practice that is previously unknown to research on tax administration: mandatory taxpayer self-inspections. The practice emerged spontaneously across China in the 1990s and persists to this day despite having no basis in law. If taxpayers report additional...

In a market where firms with different characteristics decide upon both the level of emissions and their reports, we study the optimal audit policy for an enforcement agency whose objective is to minimize the level of emissions. We show that it is optimal to devote the resources primarily to the...

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...

We examine whether tax audit regimes become more efficient if (i) there are audited financial statements and (ii) tax auditors have access to the internal statutory audit report revealing information about statutory audit adjustments. Our analysis is based on a standard tax compliance game that...

We study optimal income taxation in a framework where one's willingness to report his income truthfully is positively correlated with his type. We show that allowing low-productivity types to cheat leads to Pareto-superior outcomes as compared to deterring them, even if audits can be performed...

The Norwegian Tax Administration operated multi-year random audits of personal income tax returns. We exploit this exceptional randomized setup to estimate the effects of tax audits on future compliance explicitly distinguishing between dynamic responses of compliant and noncompliant audited...

The Norwegian Tax Administration operated multi-year random audits of personal income tax returns. We exploit this exceptional randomized setup to estimate the effects of tax audits on future compliance explicitly distinguishing between dynamic responses of compliant and noncompliant audited...

Tax audits are a necessary component of the tax system but have potentially adverse real effects on firms selected for audit. This paper examines the real effects on small firms of being subjected to a tax audit, using administrative data from both random and nonrandom tax audits. We find that...

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...

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...

Tax administrations use machine learning to predict risk scores as a basis for selecting individual taxpayers for audit. Audits detect noncompliance immediately, but may also alter future filing behavior. This analysis is the first to estimate compliance effects of audits among high-risk wage...

We employed a frame-theoretic framework to formulate and analyze a number of tax audit rules, especially the lowest income reporter audited rule. We explicitly considered the auditor's resource constraint to choose one target from a continuous type of taxpayer. We then tested the theoretical...

Tax administrations use machine learning to predict risk scores as a basis for selecting individual taxpayers for audit. Audits detect noncompliance immediately, but may also alter future filing behavior. This analysis is the first to estimate compliance effects of audits among high-risk wage...

This study examines the effect of tax aggressiveness and voluntary audit of the financial statements on the likelihood of tax adjustments in small private companies. We provide evidence that (1) tax aggressiveness increases the likelihood of the tax authority not accepting taxable income as...

Each year, the United States Internal Revenue Service (IRS) sends notices to selected taxpayers who claim Earned Income Tax credit (EITC) benefits to request additional documentation to verify those claims. This paper uses administrative tax data to examine the impacts of these correspondence...

For some entities, the utility-maximizing evasion rate depends substantially on tax audit features, such as audit probabilities and penalty rates. Bergolo et al. (2017) document large misperceptions about these features. In this paper, we expand the analysis of survey data to explore potential...