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Criminal Investigation Enforcement Activities and Taxpayer Noncompliance

Dubin, Jeffrey A. (2004) Criminal Investigation Enforcement Activities and Taxpayer Noncompliance. Social Science Working Paper, 1200. California Institute of Technology , Pasadena, CA. (Unpublished)

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This paper tests empirically whether measurable activities of the IRS Criminal Investigation Division (CI) affect taxpayer compliance. The analysis is based on a state-level cross-section for the time period from 1988 through 2001. First, I find that CI activities have a measurable and significant effect on voluntary compliance. Second, I conclude that the mix of sentenced cases (tax and money laundering) is not a significant determinant of tax compliance. Third, media attention shows some weak evidence of increasing compliance, at least among money laundering cases. Fourth, I find that incarceration and probation (rather than fines) have the most influence on taxpayers. Simulations using the estimated models show that the direct effect of doubling the audit rate on assessed tax collections (reported amounts and additional taxes and penalties) is $18.7 billion. Doubling CI tax and money laundering sentences is forecast to increase assessed collections by $16.7 billion. I estimate the general deterrence or spillover effects from either audit or CI activities to be approximately 94 percent.

Item Type:Report or Paper (Working Paper)
Additional Information:This research was sponsored in part by the IRS under the project: IRS Criminal Investigation Research—Empirical Analysis of the Impact of CI Activities on Taxpayer Compliance, TIRNO-00-D-0039. The author thanks Patrick Travers (Operations Research Analyst in CI Research), Peggy Opeka (Program Analyst in CI Research), Debbie King (Director of CI Research), Alan Plumley (Economist and Technical Advisor in IRS Office of Research), Mark Matthews (IRS Deputy Commissioner for Services and Enforcement), Colleen McGuire (Senior Associate, ICF Consulting), as well as seminar participants at the IRS Research Conference. James Lin (Pacific Economics Group) provided excellent research assistance.
Group:Social Science Working Papers
Funding AgencyGrant Number
Internal Revenue ServiceTIRNO-00-D-0039
Subject Keywords:tax evasion, personal income tax, panel data, econometrics
Series Name:Social Science Working Paper
Issue or Number:1200
Classification Code:JEL: H26, H24, C33, C1
Record Number:CaltechAUTHORS:20191018-120022893
Persistent URL:
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:99369
Deposited By: Katherine Johnson
Deposited On:18 Oct 2019 19:03
Last Modified:18 Oct 2019 19:03

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