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Audit State Dependent Taxpayer Compliance: Theory And Evidence From Colombia

Author

Listed:
  • James Alm

    (Tulane University)

  • James C. Cox

    (Georgia State University)

  • Vjollca Sadiraj

    (Georgia State University)

Abstract

We develop and analyze a dynamic model of individual taxpayer compliance choice that predicts "audit state dependent taxpayer compliance," by distinguishing between the implications of forward-looking versus myopic versus naïve behavior. We then test experimentally the audit state dependent model by reporting the results from the first tax compliance experiment run in Colombia. Consistent with previous studies as well as theoretical predictions, we find that subjects' compliance rates increase with greater enforcement, especially the audit rate. We also find more novel results, both theoretically and empirically: fine rates should be increased after an audit to discourage otherwise-increased underreporting, and "nudging" myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority.

Suggested Citation

  • James Alm & James C. Cox & Vjollca Sadiraj, 2019. "Audit State Dependent Taxpayer Compliance: Theory And Evidence From Colombia," Working Papers 1907, Tulane University, Department of Economics.
    • Handle: RePEc:tul:wpaper:1907
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax compliance; nudges; laboratory experiments.;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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