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

Bergolo, Marcelo; Ceni, Rodrigo; Cruces, Guillermo; Giaccobasso, Matias; Perez-Truglia, Ricardo

Abstract

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).

Citation

Bergolo, M., Ceni, R., Cruces, G., Giaccobasso, M., & Perez-Truglia, R. (2023). Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment. American Economic Journal: Economic Policy, 15(1), 110-153. https://doi.org/10.1257/pol.20200321

• Journal Article Type: Article
• Acceptance Date: Jan 1, 2023
• Online Publication Date: Feb 1, 2023
• Publication Date: 2023-02
• Deposit Date: Feb 9, 2023
• Publicly Available Date: Feb 9, 2023
• Journal: American Economic Journal: Economic Policy
• Print ISSN: 1945-7731
• Electronic ISSN: 1945-774X
• Publisher: American Economic Association
• Peer Reviewed: Peer Reviewed
• Volume: 15
• Issue: 1
• Pages: 110-153
• DOI: https://doi.org/10.1257/pol.20200321
• Keywords: General Economics, Econometrics and Finance
• Public URL: https://nottingham-repository.worktribe.com/output/17081545
• Publisher URL: https://www.aeaweb.org/articles?id=10.1257/pol.20200321
• Additional Information: Copyright © 2023 AEA