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- Title
A NOTE ON ENFORCEMENT UNCERTAINTY AND TAXPAYER COMPLIANCE.
- Authors
Reinganum, Jennifer F.; Wilde, Louis L.
- Abstract
This article deals with the presumption of the U.S. Internal Revenue Service (IRS) that taxpayer uncertainty about the extent of known compliance which the agency will tolerate encourages taxpayer compliance. Even if taxpayers know about the DIF formula used by IRS to help it select returns for scrutiny by examiners, they are not aware of the of a variety of other criteria contained in the IRS' Law Enforcement Manual which relate to the extent of noncompliance that will be tolerated by the IRS. According to IRS, the criteria exists because it is unable to detect and proceed against every taxpayer who violates the tax laws. The agency added that in order to promote voluntary compliance, it used the uncertainty in the minds of the taxpayers as to just how much overstepping of the boundaries of strict compliance will bring down the enforcement authority of the agency. The authors developed a model which supports the possibility that the IRS may indeed gain, both in terms of revenue and compliance, from some taxpayer uncertainty regarding enforcement costs. However, increasing the extent of uncertainty may not always improve compliance or increase revenue. This suggests that it may be appropriate to refuse to disclose explicit criteria related to the extent to which known noncompliance will be tolerated by the IRS, but at the same time extensive secrecy seems unwarranted.
- Subjects
UNITED States; TAXPAYER compliance; INTERNAL revenue law; TAXATION; LAW enforcement; LEGAL compliance; UNITED States. Internal Revenue Service
- Publication
Quarterly Journal of Economics, 1988, Vol 103, Issue 4, p793
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1886076