The audit selection criteria of state and federal enforcement agencies are somewhat different, which suggests that sharing information could increase agency revenues. Rewards can provide a significant positive inducement for greater compliance. Many individuals substantially overweight the probability of an audit. Individuals pay more in taxes when faced with a public program that they have selected, that they value, and that they know enjoys widespread support. The social norm of compliance can be affected by the institutions that face individuals and by individual participation in the selection of those institutions.
Demographic variables are important determinants of behavior.
Given the underlying data problems, this empirical work needs to be treated cautiously. Still, these results indicate that the enforcement agency can increase compliance by changing its enforcement strategy, but that there are limits to strategies based only on greater enforcement. Government policies Governments everywhere wish to increase tax compliance. The standard policy prescription has long been an increase in penalty and audit rates. However, it is unlikely that such extreme measures will be implemented.