IDEAS home Printed from https://ideas.repec.org/a/kap/itaxpf/v32y2025i6d10.1007_s10797-025-09895-8.html
   My bibliography  Save this article

Tax enforcement and firm performance: real and reporting responses to risk-based tax audits

Author

Listed:
  • Jarkko Harju

    (Tampere University & Finnish Centre of Tax Systems Research (FIT) & CESifo)

  • Kaisa Kotakorpi

    (Tampere University & Finnish Centre of Tax Systems Research (FIT) & CESifo)

  • Tuomas Matikka

    (VATT Institute for Economic Research & Finnish Centre of Tax Systems Research (FIT) & CESifo)

  • Annika Nivala

    (VATT Institute for Economic Research & Finnish Centre of Tax Systems Research (FIT))

Abstract

We analyze firm responses to risk-based tax audits using data on the full population of firms in Finland. We find an immediate and persistent increase in reported profits by the audited firms after audit, compared to matched non-audited firms with a similar development in key outcomes before the audit. This indicates non-compliance in the baseline. Both revenue and labor costs increase after audit, suggesting that some firms follow a strategy of under-reporting their overall scale of operation. Our most novel finding is that audits increase bankruptcies among non-compliant firms, which implies that tax enforcement has real effects on market outcomes.

Suggested Citation

  • Jarkko Harju & Kaisa Kotakorpi & Tuomas Matikka & Annika Nivala, 2025. "Tax enforcement and firm performance: real and reporting responses to risk-based tax audits," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(6), pages 1734-1776, December.
    • Handle: RePEc:kap:itaxpf:v:32:y:2025:i:6:d:10.1007_s10797-025-09895-8
    DOI: 10.1007/s10797-025-09895-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10797-025-09895-8
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10797-025-09895-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:32:y:2025:i:6:d:10.1007_s10797-025-09895-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.