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Audit Selection and Firm Compliance With a Broad-Based Sales Tax

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Listed:
  • Alm, James
  • Blackwell, Calvin
  • McKee, Michael

Abstract

This paper examines the process by which firms are selected for a sales tax audit and the determinants of subsequent firm compliance behavior, focusing upon the Gross Receipts Tax in New Mexico. A two–stage selection model is used to estimate the State’s audit selection rule and, conditional upon audit selection, the firm’s compliance choice. The first–stage estimation results indicate that auditors select returns based upon a systematic, even if informal, audit rule. The second–stage results show that firms that exhibit greater variation in deductions, provide services, miss filing deadlines, and have an out–of–state mailing address have a lower compliance rate.

Suggested Citation

  • Alm, James & Blackwell, Calvin & McKee, Michael, 2004. "Audit Selection and Firm Compliance With a Broad-Based Sales Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 209-227, June.
  • Handle: RePEc:ntj:journl:v:57:y:2004:i:2:p:209-27
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    Citations

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    Cited by:

    1. Praveen Sinha, 2010. "An econometric analysis of skewed productivity outcomes," Empirical Economics, Springer, vol. 38(2), pages 347-360, April.
    2. Roberto José Arias, 2004. "Reglas de selección para la fiscalización de Impuestos a las Ventas," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(2), pages 29-62, July.
    3. James Alm & Keith Finlay, 2013. "Who Benefits from Tax Evasion?," Economic Analysis and Policy, Elsevier, vol. 43(2), pages 139-154, September.
    4. Andrew Yim, 2009. "Efficient Committed Budget for Implementing Target Audit Probability for Many Inspectees," Management Science, INFORMS, vol. 55(12), pages 2000-2018, December.
    5. Imes, Amanda J. Thoe, 2013. "An examination of the sales and use tax gap based on Minnesota audit experience," Master's Theses 157013, University of Minnesota, Department of Applied Economics.
    6. Alm, James & Martinez-Vazquez, Jorge & McClellan, Chandler, 2016. "Corruption and firm tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 124(C), pages 146-163.
    7. Johnson, Cathleen & Masclet, David & Montmarquette, Claude, 2010. "The Effect of Perfect Monitoring of Matched Income on Sales Tax Compliance: An Experimental Investigation," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(1), pages 121-148, March.
    8. Birskyte Liucija, 2014. "The Impact of Trust in Government on Tax Paying Behavior of Nonfarm Sole Proprietors," Scientific Annals of Economics and Business, Sciendo, vol. 61(1), pages 1-15, July.
    9. Edoardo Di Porto, 2009. "Audit, tax compliance and undeclared work: an empirical analysis," LABORatorio R. Revelli Working Papers Series 94, LABORatorio R. Revelli, Centre for Employment Studies.
    10. Fabio Méndez, 2014. "Can corruption foster regulatory compliance?," Public Choice, Springer, vol. 158(1), pages 189-207, January.
    11. James, Simon & Edwards, Alison, 2010. "An annotated bibliography of tax compliance and tax compliance costs," MPRA Paper 26106, University Library of Munich, Germany.

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