Tax Compliance with Endogenous Audit Selection Rules

James Alm (), Mark B Cronshaw and Michael McKee

Kyklos, 1993, vol. 46, issue 1, pages 27-45

Abstract: This paper uses experimental methods to examine the effectiveness of endogenous audit selection rules in which the audit probability depends upon taxpayer actions. The results indicate that endogenous rules are able to generate compliance far greater than random audit rules, even when the random audit rate is 50 percent. In particular, a cutoff rule is most effective in increasing compliance, although it requires a large number of audits, and regimes in which back or future audits depend on a taxpayer's current declarations also significantly increase compliance. The results thereby provide strong support for strategic selection of tax returns. Copyright 1993 by WWZ and Helbing & Lichtenhahn Verlag AG

Date: 1993
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