Abstract
Empirical studies of tax compliance have typically used data aggregated by audit class to analyze the impact of federal income tax and enforcement structures on the individual's compliance decision. This paper uses micro data from individual tax returns audited during the 1971 cycle of the Internal Revenue Service's (IRS) Tax Compliance and Measurement Program to reexamine the determinants of tax compliance. IRS data have also consistently revealed marked differences in voluntary reporting rates across different types of income. These differences may be driven by differential information reporting requirements. Hence, separate compliance equations are estimated for income subject to third-party information reporting and for all other income. The results show third-party information reporting to be an effective deterrent to noncompliance, but cast doubt on the presumption that lower marginal tax rates led to greater compliance.
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Kamdar, N. Information reporting and tax compliance: An investigation using individual TCMP data. Atlantic Economic Journal 23, 278–292 (1995). https://doi.org/10.1007/BF02298764
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DOI: https://doi.org/10.1007/BF02298764