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

The canonical model of Allingham and Sandmo (1972) predicts that firms evade taxes by optimally trading off between the costs benefits evasion. However, there is no direct evidence react to audits in this way. We conducted a large-scale field experiment collaboration with tax authority address question. sent letters 20,440 small- medium-sized collectively paid more than US$200 million per year. find providing information about significantly affected compliance but manner was inconsistent (1972). (JEL C93, D22, H25, H26, K34, L25, O14)