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The indirect effects of auditing taxpayers

Author

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  • Marisa Ratto

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Richard Thomas

    (autre - AUTRES)

  • David Ulph

    (autre - AUTRES)

Abstract

In this paper we focus on the effects of investigations on tax compliance. Results from empirical studies suggest that the effects of audits are not only in terms of recovered unpaid tax (direct effects), but there are also indirect effects in terms of future better compliance in the rest of the community. The evidence suggests that such indirect effects tend to outweigh the direct effect. However, current policy decisions of how to allocate investigation resources across different groups of taxpayers generally neglect the indirect effects, generating a potential resource misallocation issue. With the aim to clarify a possible mechanism through which the indirect effects work and hence to inform any policy recommendations, we model tax compliance as a social norm and decompose the total effect of an increase in the audit probability into a direct effect (increased expected fine) and a multiplier effect due to taxpayers' interdependencies.

Suggested Citation

  • Marisa Ratto & Richard Thomas & David Ulph, 2013. "The indirect effects of auditing taxpayers," Post-Print hal-01651143, HAL.
    • Handle: RePEc:hal:journl:hal-01651143
    DOI: 10.1177/1091142112448414
    Note: View the original document on HAL open archive server: https://hal.science/hal-01651143
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    References listed on IDEAS

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    Cited by:

    1. Matthew D. Rablen, 2014. "Audit Probability versus Effectiveness: The Beckerian Approach Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 322-342, April.
    2. Gamannossi degl’Innocenti, Duccio & Rablen, Matthew D., 2020. "Tax evasion on a social network," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 79-91.
    3. Michele Rabasco & Pietro Battiston, 2023. "Predicting the deterrence effect of tax audits. A machine learning approach," Metroeconomica, Wiley Blackwell, vol. 74(3), pages 531-556, July.
    4. Athanasios O. Tagkalakis, 2014. "The direct and indirect effects of audits on the tax revenue in Greece," Economics Bulletin, AccessEcon, vol. 34(2), pages 984-1001.
    5. Debora Di Gioacchino & Domenico Fichera, 2022. "Tax evasion and social reputation: The role of influencers in a social network," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1048-1069, November.

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