Behavioural Responses to Taxpayer Audits: Evidence from UK Random Taxpayer Enquiries

This paper argues that a random audit process provides income taxpayers with information that can be expected to alter their perceptions and hence their behavioral responses to audits. Comparing samples of randomly selected audited and non-audited UK taxpayers, the evidence confirms predictions that audited taxpayers found to be compliant reduce their subsequent compliance. The reverse response is observed for taxpayers found to be non-compliant. For some taxpayers these responses were especially evident following the completion of the random audit; that is, after a compliant/non-compliant verdict had been reached. These results serve to highlight the importance of testing separately for the responses of taxpayers facing different opportunities and incentives to evade tax to avoid conflating, their different effects. The paper also argues that the UK random audit program may provide an important revenue-enhancing complement to its program of risk-based auditing."