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AUDIT STATE DEPENDENT TAXPAYER COMPLIANCE: THEORY AND EVIDENCE FROM COLOMBIA
Author(s) -
Alm James,
Cox James C.,
Sadiraj Vjollca
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12864
Subject(s) - taxpayer , audit , compliance (psychology) , enforcement , accounting , business , economics , psychology , political science , social psychology , law , macroeconomics
We develop and analyze a dynamic model of individual taxpayer compliance choice that predicts “audit state dependent taxpayer compliance,” by distinguishing between 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. We find that subjects' compliance rates increase with greater enforcement. We also find more novel results: fine rates should be increased after an audit, and “nudging” myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority. ( JEL H26, C91)