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The deterrence effect of real-world operational tax audits


  • Gabriele, Mazzolini
  • Laura, Pagani
  • Alessandro, Santoro


We use a large administrative tax-returns panel dataset merged with tax audit database to estimate the effect of real-world operational tax audits on subsequent tax behavior. Our identification strategy and the institutional setting that we consider enable us to address potential endogeneity related to non-random selection of taxpayers to be audited. We find a positive and lasting effect of audits on subsequent reported income. However, in line with theoretical predictions, taxpayers do not increase tax compliance when the tax authority does not assess a positive additional income. Our results are robust to a variety of specifications and samples.

Suggested Citation

  • Gabriele, Mazzolini & Laura, Pagani & Alessandro, Santoro, 2017. "The deterrence effect of real-world operational tax audits," Working Papers 359, University of Milano-Bicocca, Department of Economics, revised 03 Feb 2017.
  • Handle: RePEc:mib:wpaper:359

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    References listed on IDEAS

    1. Raj Chetty, 2009. "Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 31-52, August.
    2. Gemmell, Norman & Ratto, Marisa, 2012. "Behavioral Responses to Taxpayer Audits: Evidence From Random Taxpayer Inquiries," National Tax Journal, National Tax Association, vol. 65(1), pages 33-57, March.
    3. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
    4. Slemrod, Joel & Blumenthal, Marsha & Christian, Charles, 2001. "Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota," Journal of Public Economics, Elsevier, vol. 79(3), pages 455-483, March.
    5. Henrik Jacobsen Kleven & Martin B. Knudsen & Claus Thustrup Kreiner & Søren Pedersen & Emmanuel Saez, 2011. "Unwilling or Unable to Cheat? Evidence From a Tax Audit Experiment in Denmark," Econometrica, Econometric Society, vol. 79(3), pages 651-692, May.
    6. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    7. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
    8. repec:dau:papers:123456789/11056 is not listed on IDEAS
    9. Jason DeBacker & Bradley T. Heim & Anh Tran & Alexander Yuskavage, 2015. "Legal Enforcement and Corporate Behavior: An Analysis of Tax Aggressiveness after an Audit," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 291-324.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Contro l’evasione è meglio l’accertamento
      by Laura Pagani in La Voce on 2017-02-11 04:33:21

    More about this item


    Tax Compliance; Administrative Panel Data; Tax Audits;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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