Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment

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 Urugua...

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Autores principales: Bérgolo Sosa, Marcelo, Ceni, Rodrigo, Cruces, Guillermo, Giaccobasso, Matías, Perez-Truglia, Ricardo
Formato: Articulo Documento de trabajo
Lenguaje:Inglés
Publicado: 2019
Materias:
Tax
Acceso en línea:http://sedici.unlp.edu.ar/handle/10915/87393
Aporte de:SEDICI (UNLP) de Universidad Nacional de La Plata Ver origen
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spelling I19-R120-10915-873932021-09-17T14:09:04Z http://sedici.unlp.edu.ar/handle/10915/87393 issn:1853-0168 Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment Bérgolo Sosa, Marcelo Ceni, Rodrigo Cruces, Guillermo Giaccobasso, Matías Perez-Truglia, Ricardo 2019-11 2019-12-13T16:23:37Z en Ciencias Económicas Tax Evasion Audits Penalties Frictions 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 Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds. Centro de Estudios Distributivos, Laborales y Sociales Articulo Documento de trabajo http://creativecommons.org/licenses/by/4.0/ Creative Commons Attribution 4.0 International (CC BY 4.0) application/pdf
institution Universidad Nacional de La Plata
institution_str I-19
repository_str R-120
collection SEDICI (UNLP)
language Inglés
topic Ciencias Económicas
Tax
Evasion
Audits
Penalties
Frictions
spellingShingle Ciencias Económicas
Tax
Evasion
Audits
Penalties
Frictions
Bérgolo Sosa, Marcelo
Ceni, Rodrigo
Cruces, Guillermo
Giaccobasso, Matías
Perez-Truglia, Ricardo
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
topic_facet Ciencias Económicas
Tax
Evasion
Audits
Penalties
Frictions
description 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 Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.
format Articulo
Documento de trabajo
author Bérgolo Sosa, Marcelo
Ceni, Rodrigo
Cruces, Guillermo
Giaccobasso, Matías
Perez-Truglia, Ricardo
author_facet Bérgolo Sosa, Marcelo
Ceni, Rodrigo
Cruces, Guillermo
Giaccobasso, Matías
Perez-Truglia, Ricardo
author_sort Bérgolo Sosa, Marcelo
title Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
title_short Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
title_full Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
title_fullStr Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
title_full_unstemmed Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
title_sort tax audits as scarecrows : evidence from a large-scale field experiment
publishDate 2019
url http://sedici.unlp.edu.ar/handle/10915/87393
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