NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Marcelo L. Bérgolo

Instituto de Economia (IECON)
Universidad de La Republica
1375 Joaquin Requena
Montevideo, Uruguay

E-Mail: mbergolo@iecon.ccee.edu.uy

NBER Working Papers and Publications

July 2017Tax Audits as Scarecrows: Evidence from a Large-Scale Field Experiment
with Rodrigo Ceni, Guillermo Cruces, Matias Giaccobasso, Ricardo Perez-Truglia: w23631
According to the canonical model of Allingham and Sandmo (1972), firms evade taxes by making a trade-off between a lower tax burden and higher expected penalties. However, there is still no consensus about whether real-world firms operate in this rational way. We conducted a large-scale field experiment, sending letters to over 20,000 firms that collectively pay over 200 million dollars in taxes per year. In our letters, we provided firms with exogenous but nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measure 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, according to administrative data. We find that firms do increase t...
 
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