The Effect of Late Payment Penalties on the Payment Timing of Owed Taxes

11 Pages Posted: 6 Dec 2022

See all articles by Peer Skov

Peer Skov

Auckland University of Technology

Abstract

This paper studies the effectiveness of a policy designed to influence the timing decision for payments of owed taxes. Owed taxes arise when the sum of the foregoing tax year’s preliminary tax payments falls short of the total tax liability. In 2009 the Danish tax authority (SKAT) introduced a small interest penalty amounting to a daily price of approximately DKK0.5 (US$0.1) for the median amount of owed taxes. Using administrative tax data, I show that the penalty introduction led to a 50-day advancement of payments.

Keywords: tax compliance, tax enforcement

Suggested Citation

Skov, Peer, The Effect of Late Payment Penalties on the Payment Timing of Owed Taxes. Available at SSRN: https://ssrn.com/abstract=4294842 or http://dx.doi.org/10.2139/ssrn.4294842

Peer Skov (Contact Author)

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

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