Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment
- Autores
- Bérgolo Sosa, Marcelo; Ceni, Rodrigo; Cruces, Guillermo; Giaccobasso, Matías; Perez-Truglia, Ricardo
- Año de publicación
- 2019
- Idioma
- inglés
- Tipo de recurso
- documento de trabajo
- Estado
- versión enviada
- Descripción
- The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.
Centro de Estudios Distributivos, Laborales y Sociales - Materia
-
Ciencias Económicas
Tax
Evasion
Audits
Penalties
Frictions - Nivel de accesibilidad
- acceso abierto
- Condiciones de uso
- http://creativecommons.org/licenses/by/4.0/
- Repositorio
- Institución
- Universidad Nacional de La Plata
- OAI Identificador
- oai:sedici.unlp.edu.ar:10915/87393
Ver los metadatos del registro completo
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Tax Audits as Scarecrows : Evidence from a Large-Scale Field ExperimentBérgolo Sosa, MarceloCeni, RodrigoCruces, GuillermoGiaccobasso, MatíasPerez-Truglia, RicardoCiencias EconómicasTaxEvasionAuditsPenaltiesFrictionsThe canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.Centro de Estudios Distributivos, Laborales y Sociales2019-11info:eu-repo/semantics/workingPaperinfo:eu-repo/semantics/submittedVersionDocumento de trabajohttp://purl.org/coar/resource_type/c_8042info:ar-repo/semantics/documentoDeTrabajoapplication/pdfhttp://sedici.unlp.edu.ar/handle/10915/87393enginfo:eu-repo/semantics/altIdentifier/issn/1853-0168info:eu-repo/semantics/reference/hdl/10915/125062info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by/4.0/Creative Commons Attribution 4.0 International (CC BY 4.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T11:17:24Zoai:sedici.unlp.edu.ar:10915/87393Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 11:17:25.195SEDICI (UNLP) - Universidad Nacional de La Platafalse |
dc.title.none.fl_str_mv |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
title |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
spellingShingle |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment Bérgolo Sosa, Marcelo Ciencias Económicas Tax Evasion Audits Penalties Frictions |
title_short |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
title_full |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
title_fullStr |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
title_full_unstemmed |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
title_sort |
Tax Audits as Scarecrows : Evidence from a Large-Scale Field Experiment |
dc.creator.none.fl_str_mv |
Bérgolo Sosa, Marcelo Ceni, Rodrigo Cruces, Guillermo Giaccobasso, Matías Perez-Truglia, Ricardo |
author |
Bérgolo Sosa, Marcelo |
author_facet |
Bérgolo Sosa, Marcelo Ceni, Rodrigo Cruces, Guillermo Giaccobasso, Matías Perez-Truglia, Ricardo |
author_role |
author |
author2 |
Ceni, Rodrigo Cruces, Guillermo Giaccobasso, Matías Perez-Truglia, Ricardo |
author2_role |
author author author author |
dc.subject.none.fl_str_mv |
Ciencias Económicas Tax Evasion Audits Penalties Frictions |
topic |
Ciencias Económicas Tax Evasion Audits Penalties Frictions |
dc.description.none.fl_txt_mv |
The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds. Centro de Estudios Distributivos, Laborales y Sociales |
description |
The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions about the auditing process, based on survey data, as well as on the actual taxes paid, based on administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model, risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds. |
publishDate |
2019 |
dc.date.none.fl_str_mv |
2019-11 |
dc.type.none.fl_str_mv |
info:eu-repo/semantics/workingPaper info:eu-repo/semantics/submittedVersion Documento de trabajo http://purl.org/coar/resource_type/c_8042 info:ar-repo/semantics/documentoDeTrabajo |
format |
workingPaper |
status_str |
submittedVersion |
dc.identifier.none.fl_str_mv |
http://sedici.unlp.edu.ar/handle/10915/87393 |
url |
http://sedici.unlp.edu.ar/handle/10915/87393 |
dc.language.none.fl_str_mv |
eng |
language |
eng |
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info:eu-repo/semantics/altIdentifier/issn/1853-0168 info:eu-repo/semantics/reference/hdl/10915/125062 |
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info:eu-repo/semantics/openAccess http://creativecommons.org/licenses/by/4.0/ Creative Commons Attribution 4.0 International (CC BY 4.0) |
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openAccess |
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http://creativecommons.org/licenses/by/4.0/ Creative Commons Attribution 4.0 International (CC BY 4.0) |
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application/pdf |
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SEDICI (UNLP) - Universidad Nacional de La Plata |
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