Tax Compliance and Perceptions of the Risks of Detection and Criminal Prosecution

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Abstract
In this paper we use a survey concerning a hypothetical taxpayer to analyze how certain features of the enforcement of the tax laws shape perceptions of the risks of detection and penalties for tax noncompliance. We also examine the effects of these perceptions on intended noncompliance behavior. Our findings provide strong support for various hypotheses concerning the effect of the enforcement process on perceptions. We also find, in contrast to prior results, that the perceived risk of criminal prosecution appears to act as a powerful deterrent to noncompliance. We explain why earlier studies might have failed to detect a deterrent role for the severity of punishment.

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