A competitive audit selection mechanism with incomplete information

International Tax and Public Finance. 2025.

Fišar M., Krčál O., Špalek J., Staněk R., Tremewan J. C.

The literature on experimental tax and regulatory compliance has highlighted significant advantages associated with competitive audit selection mechanisms (ASMs) predicated on differences in estimated undeclared incomes among taxpayers. This paper explores the potential negative consequences of competitive ASMs in situations where authorities lack an unbiased indicator of these differences. Through a laboratory experiment, we demonstrate that asymmetric information between taxpayers and tax authorities can diminish compliance and exacerbate inequality within competitive ASMs. Our findings underscore the need for caution concerning the perceived benefits of competitive ASMs and emphasize the importance of allocating resources to mitigate income heterogeneity among groups subject to competitive audit selection.

Keywords: Laboratory experiment

Publication based on the results of: Multidisciplinary study of behavior and decision-making in health population and patients using behavioral, economic, neurocognitive, neuroeconomic, neurocomputational and neural network approaches (2025)