Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment

Autores
Bérgolo Sosa, Marcelo; Ceni, Rodrigo; Cruces, Guillermo Antonio; Giaccobasso, Matías; Pérez Truglia, Ricardo
Año de publicación
2017
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
Public economics
Experimental Design
Econometrics
Taxation
Law and Economics
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by-nc-sa/4.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/125062

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spelling Tax Audits as Scarecrows: Evidence from a Large-Scale Field ExperimentBérgolo Sosa, MarceloCeni, RodrigoCruces, Guillermo AntonioGiaccobasso, MatíasPérez Truglia, RicardoCiencias EconómicasPublic economicsExperimental DesignEconometricsTaxationLaw and EconomicsThe 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 Sociales2017info: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/10915/125062enginfo:eu-repo/semantics/altIdentifier/doi/10.3386/w23631info:eu-repo/semantics/reference/hdl/10915/87393info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by-nc-sa/4.0/Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T11:29:49Zoai:sedici.unlp.edu.ar:10915/125062Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 11:29:49.402SEDICI (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
Public economics
Experimental Design
Econometrics
Taxation
Law and Economics
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 Antonio
Giaccobasso, Matías
Pérez Truglia, Ricardo
author Bérgolo Sosa, Marcelo
author_facet Bérgolo Sosa, Marcelo
Ceni, Rodrigo
Cruces, Guillermo Antonio
Giaccobasso, Matías
Pérez Truglia, Ricardo
author_role author
author2 Ceni, Rodrigo
Cruces, Guillermo Antonio
Giaccobasso, Matías
Pérez Truglia, Ricardo
author2_role author
author
author
author
dc.subject.none.fl_str_mv Ciencias Económicas
Public economics
Experimental Design
Econometrics
Taxation
Law and Economics
topic Ciencias Económicas
Public economics
Experimental Design
Econometrics
Taxation
Law and Economics
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 2017
dc.date.none.fl_str_mv 2017
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
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url http://sedici.unlp.edu.ar/handle/10915/125062
dc.language.none.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv info:eu-repo/semantics/altIdentifier/doi/10.3386/w23631
info:eu-repo/semantics/reference/hdl/10915/87393
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
http://creativecommons.org/licenses/by-nc-sa/4.0/
Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
eu_rights_str_mv openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by-nc-sa/4.0/
Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:SEDICI (UNLP)
instname:Universidad Nacional de La Plata
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repository.mail.fl_str_mv alira@sedici.unlp.edu.ar
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