Working Paper: NBER ID: w24799
Authors: Joel Slemrod
Abstract: This paper reviews recent economic research in tax compliance and enforcement. After briefly laying out the economics of tax evasion, it focuses on recent empirical contributions. It first discusses what methodologies and data have facilitated these contributions, and then presents critical summaries of what has been learned. It discusses a promising new development, the analysis of randomized controlled trials mostly delivered via letters from the tax authority, and then reviews recent research using various methods about the impact of the principal enforcement tax policy instruments: audits, information reporting, and remittance regimes. I also explore several understudied issues worthy of more research attention. The paper closes by outlining a normative framework based on the behavioral response elasticities now being credibly estimated that allows one to assess whether a given enforcement intervention is worth doing.
Keywords: Tax compliance; Tax enforcement; Tax evasion; Randomized controlled trials; Behavioral economics
JEL Codes: H20; H26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased audit intensity (p) (M42) | decrease in tax evasion (H26) |
| third-party information reporting (H24) | lower noncompliance rate (K40) |
| letters sent to taxpayers (H26) | alter taxpayer behavior (H26) |
| letters sent to taxpayers (H26) | increase compliance (H26) |
| audit threats (M42) | compliance behavior (K40) |
| informational letters (Y20) | perceived probability of detection (p) (D80) |
| informational letters (Y20) | perceived penalties for evasion (f) (H26) |