Deterrence Effects of Auditing Rules: An Experimental Study
AbstractThis paper examines the deterrence effect of two auditing rules via a laboratory experiment. A traditional rule which is usually assumed in the auditing literature, audits a taxpayer with a constant probability, which is independent of others' tax returns. A bounded rule recently proposed and analyzed in the literature chooses a sample from the population of reported low-income taxpayers to audit, taking into account the capacity of the auditor. We �find that the deterrence effect of a bounded rule is as strong as that of a traditional rule, but is more cost-effective since fewer audits are conducted. The results lend further support to the bounded rule as a more cost-effective alternative to the traditional rule.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27859.
Date of creation: 17 Sep 2010
Date of revision:
Audit sampling plan; tax audit; tax compliance; tax evasion; experimental economics.;
Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- M42 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Auditing
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
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