A Structural Equation Model for Tax Compliance and Auditing / Kurt J. Beron, Helen V. Tauchen, Ann Dryden Witte.

By:

Beron, Kurt J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2556.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: In this paper. we estimate a three equation model for taxpayers' reported income and tax liability and for the probability of an audit. Our work differs from previous studies in that our dependent variables in the compliance equations are taxpayer reports rather than a variable related to auditor estimates of noncompliance and in that we estimate a structural equation for audits. We find that audits stimulate compliance although the effect is not large and is not statistically significant for all groups. Audits are more effective at inducing accurate reporting of subtractions from income than of income. Reduced-form results suggest that IRS activities other than audits have significant compliance effects. Results for the sociodemographic variables are interesting and help to explain some seemingly incongruous findings in the literature. We find compliance to be higher, if anything. in areas with less educated and older taxpayers, a large proportion of households headed by females. and a mostly native born population.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w2556 (Browse shelf(Opens below))	Not For Loan

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April 1988.

In this paper. we estimate a three equation model for taxpayers' reported income and tax liability and for the probability of an audit. Our work differs from previous studies in that our dependent variables in the compliance equations are taxpayer reports rather than a variable related to auditor estimates of noncompliance and in that we estimate a structural equation for audits. We find that audits stimulate compliance although the effect is not large and is not statistically significant for all groups. Audits are more effective at inducing accurate reporting of subtractions from income than of income. Reduced-form results suggest that IRS activities other than audits have significant compliance effects. Results for the sociodemographic variables are interesting and help to explain some seemingly incongruous findings in the literature. We find compliance to be higher, if anything. in areas with less educated and older taxpayers, a large proportion of households headed by females. and a mostly native born population.