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Log in through your institution. This paper analyzes a tax enforcement field experiment in Denmark. In the base year, a stratified and representative sample of over 40, individual income tax filers was selected for the experiment. Half of the tax filers were randomly selected to be thoroughly audited, while the rest were deliberately not audited.

The following year, threat-of-audit letters were randomly ased and sent to tax filers in both groups. We present three main empirical findings. First, using baseline audit data, we find that the tax evasion rate is close to zero for income subject to third-party reporting, but substantial for self-reported income. Since most income is subject to third-party reporting, the overall evasion rate is modest.

Second, using quasi-experimental variation created by large kinks in the income tax schedule, we find that marginal tax rates have a positive impact on tax evasion for self-reported income, but that this effect is small in comparison to legal avoidance and behavioral responses.

Third, using the randomization of enforcement, we find that prior audits and threat-of-audit letters have ificant effects on self-reported income, but no effect on third-party reported income. All these empirical can be explained by extending the standard model of rational tax evasion to allow for the key distinction between self-reported and third-party reported income. Econometrica publishes original articles in all branches of economics - theoretical and empirical, abstract and applied, providing wide-ranging coverage across the subject area.

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It promotes studies that aim at the unification of the theoretical-quantitative and the empirical-quantitative approach to economic problems and that are penetrated by constructive and rigorous thinking. It explores a unique range of topics each year - from the frontier of theoretical developments in many new and important areas, to research on current and applied economic problems, to methodologically innovative, theoretical and applied studies in econometrics.

The Econometric Society is an international society for the advancement of economic theory in its relation to statistics and mathematics. Henrik Jacobsen Kleven, Martin B. Cite this Item Copy Citation.

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Custom alerts when new content is added. Abstract This paper analyzes a tax enforcement field experiment in Denmark. Journal Information Econometrica publishes original articles in all branches of economics - theoretical and empirical, abstract and applied, providing wide-ranging coverage across the subject area. Publisher Information The Econometric Society is an international society for the advancement of economic theory in its relation to statistics and mathematics.

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