This paper presents an econometric analysis of taxpayer compliance, exploring its relationship with audit rates, penalties if detected, tax rate schedule, income level, and sources of self-employment income. Using data drawn from theAnnual Report of the Commissioner of Internal Revenue Service [IRS, various] and the Data Book [IRS, various]for 1980 to 1995, the audit rate and penalty rate are both effective deterrents to noncompliance. The effectiveness of these two policy instruments depends upon the individual's level of income. It seems the higher the income level, the more effective these instruments are. In general, compliance increases with the level of income but at a decreasing rate. It is also found that individuals tend to comply less as the marginal tax rate rises. Again, such tendency is more pronounced for high-income taxpayers than for low-income taxpayers. (JEL H20, H24, H26) *University of Kentucky--U.S.A. *" Francis Marion University--U.S.A. The authors are grateful to an anonymous referee for helpful comments and suggestions. 186ALI ET AL.: TAXPAYER COMPLIANCE 187 various]. The audit rate and penalty rate both serve as effective deterrents to noncompliance. The effectiveness of these two policy instruments depends upon the individual's level of income. It seems the higher the income level, the more effective these instruments are. In general, compliance increases with the level of income but at a decreasing rate. It is also found that individuals tend to comply less as the marginal tax rate rises. Again, such tendency is more pronounced for high-income taxpayers than for low-income taxpayers.The plan for this study is as follows. The second section reviews the existing theoretical and empirical literature on tax compliance. The third section develops an econometric model for tax compliance. The fourth section reports the estimated model and presents new empirical evidence on how audit rates, penalty rates and tax rates affect compliance. Some concluding remarks are presented in the fifth section.
A conceptual foundation for the Statement of Cash Flows based on the ten elements of financial statements provides students with a deep understanding of core accounting concepts. Traditional methods of teaching the statement of cash flows tend to focus on statement preparation rules, masking the effect of business events on the change in cash. Accounting majors and non-majors alike both benefit from a clear understanding of the direct relationship between economic events and financial statement elements. This teaching note provides a conceptual illustration of the Statement of Cash Flows based on the ten elements of financial statements. The teaching method used is based on the belief that keeping it simple results in deeper understanding. This paper develops an equation for the Statement of Cash Flows directly from the Balance Sheet focusing on ten elements of financial statements. The equation analysis is followed by a flowchart illustrating the process and a simple numeric example.
Purpose -The most recent IRS estimate puts the individual tax gap at $245 billion per year. This study seeks to develop and review performance measures for the seven most important IRS programs aimed at reducing the tax gap. Design/methodology/approach -The study develops and analyzes performance measures for the last ten years. The performance measures include discovery rates, penalty rates, penalty dollars, abatement rates, abatement dollars, collection activity rates, and criminal enforcement activities (number of special agents, investigations, referrals, indictments, sentences, and length of sentences). Findings -The results are mixed regarding changes in performance measures. There was almost no change in audit rates and increases in other IRS discovery programs. There was a steady decrease in civil penalties for the first seven years followed by increases in latest three years. There were decreases in abatements for most penalties, a dramatic decrease in seizures, and significant increases in liens and levies. There were noteworthy decreases in the number of special agents and criminal investigations. The relatively small number of criminal investigation activities is surprising given the amount of the tax gap. Originality/value -This study examines all major programs aimed at the individual tax gap.
This article shares the motivation, process, and outcomes of using humorous scenes from television comedies to teach the real world of tax practice. The article advances the literature by reviewing the use of video clips in a previously unexplored discipline, discussing the process of identifying and selecting appropriate clips, and introducing and reviewing fair use guidelines for copyrighted video materials in the classroom.
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