How does the probability of tax audit effect tax compliance - experimental approach

Problems of taxation and effective tax collection are subject to debates both at national and international governmental levels. Tax rate, likelihood of tax audit and system of penalties setting are extremely important variables when considering tax policy. We conducted economic experiment at UEBA with 48 subjects. We examined two factors affecting the willingness to pay taxes. Tax rates, that were determined at levels of 10%, 20%, 30% and 40%; and the risk of realization of tax audit, which was set with probability 5%, 20% or 0%. If the probability of realization of tax control increases, taxpayers are more complying the tax regulations. Regardless the probability of tax audit realization, we found that the percentage of declaration of the income decreases with increasing tax rate up to the level of 40%, where it stagnate.