IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/22651.html
   My bibliography  Save this paper

Tax audit impact on voluntary compliance

Author

Listed:
  • Niu, Yongzhi

Abstract

This study examines the tax audit impact on voluntary compliance. It is different from those in the literature in several ways. First, models were built exclusively for investigating the voluntary compliance behavior shifts after a firm is audited. Second, apart from the theoretical approach and laboratory experiment approach used in the literature, this study applied the difference-in-differences non-experimental approach. Third, historical population data of a New York State economic sector were used in this study instead of experimental data or randomly selected sample data often used in the literature. The results of both Ordinary Least Squares (OLS) and Time Series Cross Section (TSCS) autoregressive modeling methods are presented. The results of both methods suggest that after an audit, a firm would report a higher sales growth rate. The TSCS approach shows that in the year of the audit, a typical firm would report a sales growth rate which is 2.63 percentage points higher than a firm that was not audited. The percentage would decline by a rate of 1/3 each year thereafter. The findings suggest that the audit productivity derived in many research papers, where only the direct audit collections are considered, may be underestimated. The results of this research may provide policy makers with extra incentives to strengthening the audit efforts to generate more revenues.

Suggested Citation

  • Niu, Yongzhi, 2010. "Tax audit impact on voluntary compliance," MPRA Paper 22651, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22651
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/22651/1/MPRA_paper_22651.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bernasconi, Michele, 1998. "Tax evasion and orders of risk aversion," Journal of Public Economics, Elsevier, vol. 67(1), pages 123-134, January.
    2. Kirchler,Erich, 2007. "The Economic Psychology of Tax Behaviour," Cambridge Books, Cambridge University Press, number 9780521876742, April.
    3. Beck, Paul J. & Jung, Woon-Oh, 1989. "Taxpayer compliance under uncertainty," Journal of Accounting and Public Policy, Elsevier, vol. 8(1), pages 1-27.
    4. 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.
    5. Alm, James & Jackson, Betty & McKee, Michael J., 1992. "Estimating the Determinants of Taxpayer Compliance with Experimental Data," National Tax Journal, National Tax Association, vol. 45(1), pages 107-14, March.
    6. Alm, James & Jackson, Betty & McKee, Michael J., 1992. "Estimating the Determinants of Taxpayer Compliance With Experimental Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 45(1), pages 107-114, March.
    7. Alm, James & Jackson, Betty & McKee, Michael, 1992. "Institutional Uncertainty and Taxpayer Compliance," American Economic Review, American Economic Association, vol. 82(4), pages 1018-1026, September.
    8. Alm, James & McKee, Michael J. & Beck, William, 1990. "Amazing Grace: Tax Amnesties and Compliance," National Tax Journal, National Tax Association, vol. 43(1), pages 23-37, March.
    9. Brian Erard & Jonathan S. Feinstein, 1994. "Honesty and Evasion in the Tax Compliance Game," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 1-19, Spring.
    10. Alm, James & McKee, Michael, 2006. "Audit Certainty, Audit Productivity, and Taxpayer Compliance," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 801-816, December.
    11. Alm, James & McKee, Michael J. & Beck, William, 1990. "Amazing Grace: Tax Amnesties and Compliance," National Tax Journal, National Tax Association;National Tax Journal, vol. 43(1), pages 23-37, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    tax; audit; impact; voluntary compliance; difference-in-differences;

    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:22651. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.