The Anatomy of Tax Evasion

Three things are certain in life: death, taxes, and mankind's unrelenting effort to evade both. But despite the long history of taxpayer revolts and resistance to tax laws, tax compliance has only recently emerged as a topic receiving more than passing scholarly attention. Researchers from a number of fields have attempted to establish theoretical and empirical support for some basic propositions about compliance behavior-namely, that detection risk and penalties are deterrents to noncompliance and higher tax rates encourage noncompliance.' Virtually all studies have found that measures of detection risk, such as the fraction of income subject to information reporting, the audit rate, perceived detection risk, or the difficulty of constructing an audit trail, influence compliance in the expected direction (Mason and Calvin; Clotfelter; Slemrod; Witte and Woodbury; Dubin and Wilde; Kagan). The evidence on the influence of penalties and taxes, however, is more varied. Only a few studies have found much evidence suggesting that penalties deter