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Behavioral Responses To Taxpayer Audits: Evidence From Random Taxpayer Inquiries

  • Gemmell, Norman
  • Ratto, Marisa

This paper argues that random audit programs provide income taxpayers with information that alters their perceptions of, and hence their behavioral responses to, audits. Comparing samples of randomly selected audited and non-audited UK taxpayers, the evidence confirms predictions that audited taxpayers found to be "compliant" reduce their subsequent compliance. The opposite response is observed for taxpayers found to be "noncompliant." The results highlight the importance of testing separately the responses of taxpayers facing different opportunities and incentives to evade tax in order to avoid conflating their different effects, and to reveal both positive and negative indirect revenue effects from random auditing.

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File URL: http://www.ntanet.org/NTJ/65/1/ntj-v65n01p33-57-behavioral-responses-taxpayer-audits.pdf
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File URL: http://www.ntanet.org/NTJ/65/1/ntj-v65n01p33-57-behavioral-responses-taxpayer-audits.html
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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 65 (2012)
Issue (Month): 1 (March)
Pages: 33-57

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Handle: RePEc:ntj:journl:v:65:y:2012:i:1:p:33-57
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  1. Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association, vol. 58(4), pages 643-63, December.
  2. Alm, James & McKee, Michael, 2004. "Tax compliance as a coordination game," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 297-312, July.
  3. Mittone, Luigi, 2006. "Dynamic behaviour in tax evasion: An experimental approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(5), pages 813-835, October.
  4. Webley, Paul, 1987. "Audit probabilities and tax evasion in a business simulation," Economics Letters, Elsevier, vol. 25(3), pages 267-270.
  5. Jeffrey A. Dubin, 2007. "Criminal Investigation Enforcement Activities and Taxpayer Noncompliance," Public Finance Review, , vol. 35(4), pages 500-529, July.
  6. Maciejovsky, Boris & Kirchler, Erich & Schwarzenberger, Herbert, 2007. "Misperception of chance and loss repair: On the dynamics of tax compliance," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 678-691, December.
  7. Alm, James & Jackson, Betty R. & McKee, Michael, 2009. "Getting the word out: Enforcement information dissemination and compliance behavior," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 392-402, April.
  8. Youngse Kim, 2005. "Audit Misperception, Tax Compliance, and Optimal Uncertainty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 521-541, 08.
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