Can Audits Encourage Tax Evasion? An Experimental Assessment

69 Pages Posted: 1 Feb 2016 Last revised: 16 Feb 2017

Date Written: March 16, 2016


Governments and tax administrators around the world rely on the premise that audits will deter tax evasion. This Article presents experimental evidence that this premise may be, at least in part, misguided. Counterintuitively, I find that audits presented as random may induce taxpayers to cheat more. Where audits were described as being conducted at random, participants increased their levels of evasion in the tax periods immediately following the audit. This effect, however, did not plague nonrandom audits. When a separate group of participants faced audits that were presented as being nonrandom — participants were told that detected evasion would “flag” a participant for one or more future audits — participants cheated less in the periods immediately following the audit. Overall, average compliance in the nonrandom audit condition systematically and significantly dominated average compliance in the random audit condition. By revealing, under experimental conditions, strong behavioral responses to the way tax audits are presented, this Article highlights the potential enforcement benefits of being more transparent with taxpayers about the nature of audit selection.

Keywords: Tax law, tax compliance, tax administration, experimental economics

JEL Classification: K34

Suggested Citation

Satterthwaite, Emily A., Can Audits Encourage Tax Evasion? An Experimental Assessment (March 16, 2016). 20 Florida Tax Review 1 (2016), Available at SSRN: or

Emily A. Satterthwaite (Contact Author)

University of Toronto Faculty of Law ( email )

84 Queen's Park
Toronto, Ontario M5S 2C5

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