The backfiring effect of auditing on tax compliance

Juan P. Mendoza, Jacco L. Wielhouwer and Erich Kirchler

Journal of Economic Psychology, 2017, vol. 62, issue C, 284-294

Abstract: Using country-level data from 2003–2014, we examine the association between auditing level (measured as number of verification actions taken by tax authorities per 100 taxpayers in each country) and tax compliance (measured as business executives’ perception of tax evasion). Our hypothesis is that compliance increases until a certain auditing level is reached, and decreases beyond that level (i.e., an elevated auditing level backfires). In line with our expectation, the results of a series of tests indicate that there is a U-shaped association between auditing and tax evasion. We discuss how a potential backfiring effect may depend on the extent to which compliance is voluntary.

Keywords: Tax compliance; Auditing; Tax enforcement (search for similar items in EconPapers)
JEL-codes: H26 H3 H87 K42 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:62:y:2017:i:c:p:284-294

DOI: 10.1016/j.joep.2017.07.007

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