We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.
Mazzolini, G., Pagani, L., Santoro, A. (2017). The deterrence effect of real-world operational tax audits [Working paper].
The deterrence effect of real-world operational tax audits
PAGANI, LAURA;SANTORO, ALESSANDRO
2017
Abstract
We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.File | Dimensione | Formato | |
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