Project information

Tax Compliance with a Competitive Audit Selection Mechanism: An Experimental Approach

Project Identification
GA17-00496S
Project Period
1/2017 - 12/2019
Investor / Pogramme / Project type
Czech Science Foundation
MU Faculty or unit
Faculty of Economics and Administration
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The project studies the efficiency of competitive audit selection mechanisms. It proposes three extensions of experimental designs used in the literature. In the first design, taxpayers can choose to spend scarce resources on reducing the probability that their tax fraud will be discovered in a tax audit. We develop a model that explores the effect of audit selection rules on tax evasion and concealment activities and experimentally test the predictions of the model. In the second design, we study tax compliance in situations in which auditors have no information about the actual income of taxpayers. We propose a mechanism based on reported incomes only. We tests whether the mechanism increases tax compliance and study the impact of income heterogeneity on the efficiency of the mechanism. Finally, we examine the possibility of discretionary audit selection by a human auditor. We investigate whether human auditors diverge from the optimal rule and how the possibility of discretionary audit selection influences tax compliance.

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