Tax Audits and Their Effects on Tax Compliance

Key Messages

•  Tax administrations increasingly use audits via mail (correspondence audits) to audit taxpayers 
• Correspondence audits are cheaper than face-to-face audits but their effects on compliance are unclear 
• We investigate the effects of correspondence and face-to-face audits on post-audit tax reporting 
• We find that face-to-face audits generally have strong positive effects on subsequent compliance 
• Correspondence audits sometimes reduce compliance, impacting the optimal balance between audit types