Behavioral Responses to Tax Audits : Between Deterrence and Approval *

Auditing the income tax return not only ensures that the correct amount is paid in the year of the intervention, it is expected to affect the tax compliance in the subsequent years too. A random audit selection scheme operated by the Norwegian tax administration is used to identify magnitude and duration of post-audit deterrence effects. Moreover, we explore to what extent there is a counteracting “approval effect” too, among the taxpayers found to be compliant by the audit. We find estimates in accordance with a modest deterrence effect, however statistically significant only in the first year after the audit. Behind this we see substantially larger effects in the non-compliant group, lasting for five years after the audit. The compliant taxpayers, however, show no signs of behavioral adjustments.