Code for: Tax Audits as Scarecrows Evidence from a Large-Scale Field Experiment

Principal Investigator(s): View help for Principal Investigator(s) Marcelo Bergolo, IECON-UDELAR and IZA; Rodrigo Ceni, IECON-UDELAR; Guillermo Cruces, CEDLAS-UNLP, Conicet and University of Nottingham; Matias Giaccobasso, University of California-Los Angeles and IECON-UDELAR; Ricardo Perez-Truglia, University of California-Berkeley

Version: View help for Version V1

Name	File Type	Size	Last Modified
code			11/20/2021 02:26:PM
results			08/09/2021 07:08:PM
survey_instrument			11/20/2021 02:25:PM
README.pdf	application/pdf	327.5 KB	11/20/2021 09:32:AM
codebook.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	19.4 KB	08/09/2021 03:05:PM

Project Citation:

Bergolo, Marcelo, Ceni, Rodrigo, Cruces, Guillermo , Giaccobasso, Matias, and Perez-Truglia, Ricardo . Code for: Tax Audits as Scarecrows Evidence from a Large-Scale Field Experiment. Nashville, TN: American Economic Association [publisher], 2023. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-02-03. https://doi.org/10.3886/E147201V1

Project Description

Summary:

The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off the costs and benefits of evasion. However, there is no direct evidence that firms react to audits in this way. We conducted a large-scale field experiment in collaboration with Uruguay’s tax authority to address this question. We sent letters to 20,440 small- and medium-sized firms that collectively paid more than 200 million U.S. dollars in taxes per year. Our letters provided exogenous yet nondeceptive signals about key inputs for their evasion decisions, such as audit probabilities and penalty rates. We measured the effect of these signals on their subsequent perceptions of the auditing process using survey data, as well as on the actual taxes paid using administrative data. We find that providing information about audits had a significant effect on tax compliance but in a manner that was inconsistent with Allingham and Sandmo (1972). Our findings are consistent with an alternative model of risk-as-feelings, in which messages about audits generate fear and induce probability neglect. According to this model, audits may deter tax evasion in the same way that scarecrows frighten off birds.

Scope of Project

Subject Terms: tax ; tax evasion; tax audits; tax penalties; frictions

JEL Classification:
      C93 Field Experiments
      H26 Tax Evasion and Avoidance
      K34 Tax Law
      K42 Illegal Behavior and the Enforcement of Law
      Z13 Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

Geographic Coverage: Uruguay

Time Period(s): 10/1/2012 – 9/30/2017

Collection Date(s): 10/1/2012 – 9/30/2017

Universe: Small- and medium-sized firms in Uruguay

Data Type(s): administrative records data; survey data

Methodology

Data Source: administrative records from the Uruguayan tax agency

Unit(s) of Observation: firm

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Published Versions

V1 [2023-02-03]

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