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Heard it Through the Grapevine: Direct and Network Effects of a Tax Enforcement Field Experiment

William C. Boning, John Guyton, Ronald H. Hodge, II, Joel Slemrod, Ugo Troiano

NBER Working Paper No. 24305
Issued in February 2018
NBER Program(s):Public Economics Program

Tax enforcement may affect both the behavior of those directly treated and of some taxpayers not directly treated but linked via a network to those who are treated. A large-scale randomized field experiment enables us to examine both the direct and network effects of letters and in-person visits on withheld income and payroll tax remittances by at-risk firms. Visited firms remit substantially more tax. Their tax preparers’ other clients also remit slightly more tax, while their subsidiaries remit slightly less. Letters have a much smaller direct effect and no network effects, yet may improve compliance at lower cost.

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Document Object Identifier (DOI): 10.3386/w24305

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