Statute of Limitations for Tax Evasion

Raluca Pavel, Bernur Acikgoz, Jean‐christophe Poudou () and Marc Willinger ()
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Bernur Acikgoz: IKCU - Izmir Katip Celebi University
Jean‐christophe Poudou: MRE - Montpellier Recherche en Economie - UM - Université de Montpellier
Marc Willinger: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier

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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.This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

Keywords: laboratory experiment; retroactive audits; statute of limitations (search for similar items in EconPapers)
Date: 2025-02-04
New Economics Papers: this item is included in nep-exp, nep-iue, nep-pbe and nep-pub
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-04937321v1
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Published in Kyklos, inPress, ⟨10.1111/kykl.12440⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04937321

DOI: 10.1111/kykl.12440

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