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Do Audits Deter or Provoke Future Tax Noncompliance? Evidence on Self-employed Taxpayers
Author:
Sebastian Beernull

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Matthias Kaspernull

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Erich Kirchlernull

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Brian Erardnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 223
Language:
English
Publication Date:
11 Oct 2019
DOI:
https://doi.org/10.5089/9781513515373.001
ISBN:
9781513515373
ISSN:
1018-5941
Pages:
22
Keywords:
WP; audit outcome; audited taxpayer; small business taxpayers; CIT audit; impact evaluation; audit sample; audit experience; treatment effect; audit selection; audit assessment; audit selection decision; audit selection process; control group; Auditing; Personal income; Tax assessments; Tax auditing and verification; Tax return filing compliance
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper employs unique tax administrative data and operational audit information from a sample of approximately 7,500 self-employed U.S. taxpayers to investigate the effects of operational tax audits on future reporting behavior. Our estimates indicate that audits can have substantial deterrent or counter-deterrent effects. Among those taxpayers who receive an additional tax assessment, reported taxable income is estimated to be 64% higher in the first year after the audit than it would have been in the absence of the audit. In contrast, among those taxpayers who do not receive an additional tax assessment, reported taxable income is estimated to be approximately 15% lower the year after the audit than it would have been had the audit not taken place. Our results suggest that improved targeting of audits towards noncompliant taxpayers would not only yield more direct audit revenue, it would also pay dividends in terms of future tax collections.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2019: Issue 223