Statute of Limitations for Tax Evasion

Raluca Pavel, Bernur Acikgoz, Jean-Christophe Poudou and Marc Willinger

Kyklos, 2025, vol. 78, issue 2, 729-745

Abstract: We investigate the effects of retroactive audits and varying statutes of limitations on tax compliance through a laboratory experiment. First, we solve a dynamic model using Bellman's solution to show that longer limitation periods promote compliance by raising expected penalties, as each past period carries a higher probability of inspection. Second, in our experiment, we manipulate the statute of limitations (0, 1, 3, and 6 periods), providing data that support the model's predictions. Our data also suggest that a 3‐year statute of limitation optimally balances compliance benefits with administrative efficiency.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:kyklos:v:78:y:2025:i:2:p:729-745

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