Audit State Dependent Taxpayer Compliance: Theory and Evidence from Colombia

15 Pages Posted: 14 May 2020

See all articles by James Alm

James Alm

Tulane University

James C. Cox

Georgia State University

Vjollca Sadiraj

Georgia State University

Date Written: April 2020

Abstract

We develop and analyze a dynamic model of individual taxpayer compliance choice that predicts “audit state dependent taxpayer compliance,” by distinguishing between forward‐looking versus myopic versus naïve behavior. We then test experimentally the audit state dependent model by reporting the results from the first tax compliance experiment run in Colombia. We find that subjects' compliance rates increase with greater enforcement. We also find more novel results: fine rates should be increased after an audit, and “nudging” myopic individuals toward reporting a constant rather than a fluctuating proportion of income would benefit both the taxpayer and the tax authority.

JEL Classification: H26, C91

Suggested Citation

Alm, James and Cox, James C. and Sadiraj, Vjollca, Audit State Dependent Taxpayer Compliance: Theory and Evidence from Colombia (April 2020). Economic Inquiry, Vol. 58, Issue 2, pp. 819-833, 2020, Available at SSRN: https://ssrn.com/abstract=3597048 or http://dx.doi.org/10.1111/ecin.12864

James Alm (Contact Author)

Tulane University ( email )

United States
5048628344 (Phone)

James C. Cox

Georgia State University

Vjollca Sadiraj

Georgia State University

35 Broad Street
Atlanta, GA 30303-3083
United States

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