Tax audits as scarecrows evidence from a large-scale field experiment by Marcelo Bergolo, Rodrigo Ceni Guillermo Cruces, Matias Giaccobasso and Ricardo Perez-Truglia
Contributor(s): Bérgolo, Marcelo
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Material type: 
ArticleSubject(s): EMPRESAS PEQUEÑAS Y MEDIANAS | AUDITORIA FISCAL | EVASION FISCAL | ELUSION FISCAL
In:
American Economic Journal : Economic Policy v. 15, n. 1, February 2023, p. 110-153Summary: 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).
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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).
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