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Field
Abstract
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Before
As tax evasion remains a large problem in many countries with immediate consequences for the economy and living standards, tax authorities make use of audits to deter non-compliance.
Thus, it is crucial to examine the determinants of the post-audit effect on the tax compliance behavior of audited taxpayers. In this light, I investigate experimentally the causal effect of audit effectiveness on post-audit tax compliance in presence of an endogenous audit selection rule. Furthermore, I study whether this effect differs from the one observed in a setting with an exogenous audit selection rule. To do so, I will implement a randomized control trial within a tax evasion game in the form of an online experiment using a Census-Matched sample of at least 399 citizens. Based on their order of entry in the study, participants are randomly assigned to one of the three treatments regarding audit effectiveness, low (T1), medium (T2) or high (T3). Additionally, participants experience both, a setting with an exogenous and an endogenous audit selection rule. The outcomes of interest are subjects’ (post-audit) tax compliance rates. I hypothesize that the direction of the post-audit effect depends on audit effectiveness, i.e., effective audits increase, and ineffective audits decrease post-audit tax compliance rates, in both settings. I expect that, comparing the endogenous to the exogenous audit setting, overall compliance is higher, while the effect of effective audits is stronger and the one of ineffective audits is weaker.
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After
As tax evasion remains a large problem in many countries with immediate consequences for the economy and living standards, tax authorities make use of audits to deter non-compliance.
Thus, it is crucial to examine the determinants of the post-audit effect on the tax compliance behavior of audited taxpayers. In this light, I investigate experimentally the causal effect of audit effectiveness on post-audit tax compliance in presence of an endogenous audit selection rule. Furthermore, I study whether this effect differs from the one observed in a setting with an exogenous audit selection rule. To do so, I will implement a randomized control trial within a tax evasion game in the form of an online experiment using a Census-Matched sample of at least 399 US citizens. Based on their order of entry in the study, participants are randomly assigned to one of the three treatments regarding audit effectiveness, low (T1), medium (T2) or high (T3). Additionally, participants experience both, a setting with an exogenous and an endogenous audit selection rule. The outcomes of interest are subjects’ (post-audit) tax compliance rates. I hypothesize that the direction of the post-audit effect depends on audit effectiveness, i.e., effective audits increase, and ineffective audits decrease post-audit tax compliance rates, in both settings. I expect that, comparing the endogenous to the exogenous audit setting, overall compliance is higher, while the effect of effective audits is stronger and the one of ineffective audits is weaker.
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Field
Randomization Method
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Before
The random assignment of the participants to the three treatments is based upon their order of entry in the study. The order of entry in the study is random, because subjects are free to choose when to participate in the online experiment after its implementation. In order to avoid biases due to asymmetric dropouts, participants are assigned to the treatment group with the lowest number of participants if the difference between the size of the treatment groups gets too large.
In each decision round and for each participant the outcome of a decision round, i.e. whether or not an audit takes place, is based on randomization done by a computer. This randomization takes the respective audit probabilities into account.
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After
The random assignment of the participants to the three treatments is based upon their order of entry in the study. The order of entry in the study is random, because subjects are free to choose when to participate in the online experiment after its implementation. The data for each treatment group is collected in a different experimental session.
In each decision round and for each participant the outcome of a decision round, i.e. whether or not an audit takes place, is based on randomization done by a computer. This randomization takes the respective audit probabilities into account.
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