Abstract
The IRS’s audit enforcement policy is based on the principle that audits deter taxpayers from cheating and therefore increase voluntary tax compliance. For more than forty years, however, there has been considerable debate over whether higher audit rates actually contribute to increased voluntary tax compliance. Many scholars today believe that this “deterrence theory” is incorrect since the overall data does not comport with the theory. Taxpayers, therefore, must voluntarily comply with their tax obligations for reasons other than an increased probability of getting audited. While this conclusion might be true for individual income tax returns overall, it appears there are certain sub-categories of tax returns for which audits actually do matter. For these groups, audits might affect voluntary tax compliance levels more directly.
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