Paul L. Caron

Wednesday, May 15, 2019

Lederman: Does Enforcement Reduce Voluntary Tax Compliance?

Leandra Lederman (Indiana), Does Enforcement Reduce Voluntary Tax Compliance?, 2018 BYU L. Rev. 623 (reviewed by Orly Mazur (SMU) here):

Governments generally use enforcement methods, such as audits and the imposition of penalties, to deter noncompliance with tax laws. Although this approach is consistent with most economic modeling of tax compliance, some scholars caution that enforcement may backfire, “crowding out” taxpayers’ intrinsic motivations to pay taxes to such an extent that they reduce their tax payments. This article analyzes the existing evidence to determine if and when this occurs.

Field studies suggest that enforcement tools, such as audits, are effective deterrents, generally greatly increasing tax collections. Although evidence is emerging that audits may have a negative effect on the future tax payments of those found compliant on audit, more studies are needed to determine the extent of this effect and its possible causes. Overall, studies show that audits are highly effective at increasing the tax compliance both of those audited and of other taxpayers.

Scholarship, Tax | Permalink