Tax Compliance among Managers: Evidence from Randomized Audits1

Independent Variables	Norwegian (N=1,580)	Foreign (N=394)	t	p > \|t\|
Female	0.161	0.224	–2.936	0.003
Age	50.926	44.237	10.951	0.000
Residence time	51.515	17.612	53.652	0.000
Conflict	0.000	0.378	–25.422	0.000
CPI score	15.750	49.139	–52.278	0.000
External accountant	0.786	0.873	–3.889	0.000
Conflict employees	0.050	0.202	–16.398	0.000
Ltd. company	0.833	0.843	–0.465	0.642
Salary system	0.700	0.683	0.667	0.505
Work training	0.109	0.112	–0.180	0.857
Job advertisement	0.216	0.155	2.715	0.007
Timesheet	0.477	0.531	–0.819	0.413
Terms	10.288	10.251	0.201	0.840
Audit employees	3.925	4.225	–4.607	0.000
Self-employed	0.163	0.137	11.933	0.000
Dependent Variable (2017)
Firm compliance	0.895	0.858	2.084	0.037
Tax deduction	0.950	0.921	2.220	0.026
Payroll accounts	0.965	0.967	–0.177	0.860
Monthly reporting	0.966	0.964	0.132	0.895
General accounts	0.997	0.997	0.002	0.998

1 Note: Columns 2 and 3 show the mean value of the variable (Column 1) among Norwegian and foreign managers. Column 4 shows the t-value on the differences between compliant and noncompliant managers. We use the z-test (test of proportion) for binary outcomes and the t-test for continuous outcomes. Column 5 shows the p-value for the test. Female, Conflict, External accountant, Ltd. company, Salary system, Work training, Job advertisement, and Self-employed are dummy variables. Age, Residence time, CPI score, Conflict employees, Timesheet, Terms, and Self-employed are continuous variables. Female takes value 1 if the manager is female. Age value is years. Residence time value is years. Conflict takes the value 1 if the manager was exposed to armed conflict in their home country up to twenty-five years prior to migration. CPI score is the inverted CPI score of the manager’s country of origin at the year of arrival to Norway. External accountant takes the value 1 if the firm has outsourced external accountant services. Conflict employees is the fraction of employees in the firm exposed to armed conflict in home country up to twenty-five years prior to migration. Ltd. company takes the value 1 if the firm is registered as a private limited company. Salary system takes the value 1 if the firm has a digital salary system. Work training takes the value 1 if the firm has registered employees in the work training program subsidized by the Norwegian Labour and Welfare Administration (NAV). Job advertisement takes the value 1 if the firm has advertised for vacancies in Norway. Timesheet describes the number of employees with incorrect timesheets. Terms describes number of terms (one through twelve) the firm reports salaries or benefits for any employee to the NTA. Audit employees is the number of audited employees per firm (zero through nine). Self-employed takes the value 1 if the firm is registered as a sole proprietorship at the NTA.

Table 2:

Results from the OLS and fixed effects models.

	(1)	(2)	(3)
Female	0.029 (0.020)	0.033+ (0.019)	0.014 (0.021)
Age	–0.002*** (0.001)	–0.003*** (0.000)	–0.003*** (0.000)
Foreign	–0.043+ (0.024)	–0.045+ (0.024)	–0.050* (0.023)
<5	–0.121 (0.086)	–0.166 (0.101)	–0.165+ (0.095)
5–10	–0.025 (0.040)	–0.035 (0.037)	–0.039 (0.036)
Conflict	–0.005 (0.030)	0.053* (0.026)	0.056* (0.027)
CPI score	0.001 (0.001)	0.000 (0.000)	–0.000 (0.000)
External accountant	0.096*** (0.021)	0.092*** (0.022)	0.092*** (0.023)
Conflict employees	–0.108 (0.086)	–0.125 (0.075)	–0.152* (0.066)
Constant	0.938*** (0.027)
Observations	1,959	1,936	1,928
R-squared	0.029	0.166	0.236
Romano–Wolf bootstrap p-values	Original	Romano–Wolf
Female	0.069	0.079
Age	0.001	0.000
Foreign	0.037	0.050
Residence time	0.069	0.069
Conflict	0.253	0.228
CPI score	0.490	0.446
External accountant	0.000	0.000
Conflict employees	0.042	0.040

1 Note: Estimated coefficients from OLS model runs. Standard errors in parentheses. Column (1) is from OLS without fixed effects, column (2) is from OLS with fixed effects on NTA auditor, and column (3) is from OLS with fixed effects on NTA auditor and NACE code (two-digit). Residence time >10 years is the reference category and therefore is omitted in the table. Standard errors are clustered by NACE code. Romano–Wolf test statistics are given by the original and Romano–Wolf p-values of each independent variable.

1*** p<0.001

1 **p<0.01

1* p<0.05

1+ p<0.10

Table 3:

GA model results.

	(1)	(2)	(3)
Ltd. company	0.132*** (0.030)	0.145*** (0.029)	0.103*** (0.022)
Salary system	0.085** (0.025)	0.108*** (0.029)	0.103*** (0.029)
Work training	0.037+ (0.020)	0.028+ (0.017)	0.024 (0.017)
External accountant	0.129*** (0.018)	0.115*** (0.020)	0.111*** (0.021)
Job advertisement	0.024* (0.010)	0.024** (0.009)	0.019+ (0.010)
Timesheet	0.003 (0.005)	0.000 (0.006)	0.003 (0.007)
Terms	0.022*** (0.003)	0.023*** (0.003)	0.021*** (0.003)
Conflict employees	–0.126** (0.047)	–0.094* (0.041)	–0.119* (0.048)
Constant	0.390*** (0.078)
Observations	1,897	1,872	1,864
R-squared	0.154	0.283	0.313
Romano–Wolf bootstrap p-values	Original	Romano–Wolf
Ltd. company	0.000	0.000
Salary system	0.000	0.000
Work training	0.000	0.000
External accountant	0.000	0.000
Job advertisement	0.000	0.000
Timesheet	0.479	0.475
Terms	0.000	0.000
Conflict employees	0.042	0.050

1 Note: Estimated coefficients from OLS model runs, after GA variable selection. Standard errors in parentheses. Column (1) is from OLS without fixed effects, column (2) is from OLS with fixed effects on NTA auditor, and column (3) is from OLS with fixed effects on NTA auditor and NACE code (two-digit). Standard errors are clustered by NACE code. Romano–Wolf test statistics are given by the original, and Romano–Wolf p-values of each independent variable.

1*** p<0.001

1** p<0.01

1* p<0.05

1+ p<0.10

Table 4:

LASSO model results.

	(1)	(2)	(3)
Ltd. company	0.108 (0.113)	0.131 (0.104)	0.145 (0.103)
Self-employed	–0.026 (0.118)	–0.014 (0.108)	0.050 (0.107)
Salary system	0.085** (0.025)	0.107*** (0.029)	0.102*** (0.029)
Work training	0.039+ (0.020)	0.030+ (0.016)	0.024 (0.017)
External accountant	0.128*** (0.019)	0.115*** (0.021)	0.113*** (0.023)
Audit employees	0.003 (0.004)	0.005 (0.004)	0.010* (0.004)
Timesheet	0.003 (0.005)	–0.001 (0.006)	0.001 (0.006)
Terms	0.022*** (0.004)	0.022*** (0.003)	0.020*** (0.003)
Conflict employees	–0.127** (0.046)	–0.096* (0.040)	–0.124* (0.047)
Constant	0.408*** (0.112)
Observations	1,897	1,872	1,864
R-squared	0.153	0.283	0.314
Romano–Wolf bootstrap p-values	Original	Romano–Wolf
Ltd. company	0.000	0.000
Self-employed	0.000	0.000
Salary system	0.000	0.000
Work training	0.000	0.000
External accountant	0.000	0.000
Audit employees	0.000	0.000
Timesheet	0.479	0.495
Terms	0.000	0.000
Conflict employees	0.042	0.040

1 Note: Estimated coefficients from OLS model runs, after LASSO variable selection. Standard errors in parentheses. Column (1) is from OLS without fixed effects, column (2) is from OLS with fixed effects on NTA auditor, and column (3) is from OLS with fixed effects on NTA auditor and NACE code (two-digit). Standard errors are clustered by NACE code. Romano–Wolf test statistics are given by the original and Romano–Wolf p-values of each independent variable.

1*** p<0.001

1** p<0.01

1* p<0.05

1+ p<0.10

Table 5:

Model performance comparison.

Model	MSE	Adjusted R²
GA OLS	0.0748	0.1501
GA auditor	0.0705	0.2833
GA auditor NACE	0.0699	0.2146
LASSSO OLS	0.0749	0.1490
LASSO auditor	0.0706	0.2041
LASSO auditor NACE	0.0698	0.2157

1 Note: MSE and R-squared for the GA and LASSO models.

Table A.1:

The population of businesses.

Criterion

Total revenue in 2017 > NOK 100,000
If not 1, then total revenue in 2016 ≥ NOK 200,000
Mean active work relations per month is ≤ 20
Mean active employees per month is ≥ 5
If not 4, then registered > NOK 100,000 on subcontracts and/or foreign services in 2016
Private limited companies (AS) self-employed (ENK) and Norwegian foreign-registered enterprises (NUF)
No termination date registered
Sectors in public service, defense and public social security are excluded

1 Note: Criterion 3 was set to avoid including large (compliant) corporates.

Table A1B:

CPI score sample statistics.

Country	Min	Max	Mean	Median	STD	N
Afghanistan	8	27	16	16	6.662	17
Algeria	23	36	29	29	4.851	20
Armenia	25	43	35	35	4.054	16
Australia	77	89	82	82	3.530	25
Austria	69	97	81	76	9.730	25
Belarus	20	48	32	32	8.505	21
Bosnia and Herzegovina	25	42	32	32	6.327	20
Bulgaria	29	43	37	41	4.754	17
Canada	73	92	82	81	5.171	25
Chile	50	79	65	67	7.963	19
China	22	53	38	39	6.085	22
Colombia	22	40	36	37	3.761	23
Croatia	27	52	46	49	6.040	22
Czech Republic	18	59	41	48	12.775	22
Denmark	87	100	93	93	3.510	25
Egypt	26	37	31	32	3.033	19
El Salvador	22	39	32	35	5.964	18
Eritrea	18	30	23	23	3.491	20
Estonia	57	80	71	73	6.041	22
Ethiopia	17	37	27	28	6.446	20
Finland	85	100	92	91	4.328	25
France	51	72	66	69	5.987	24
Germany	78	90	84	82	4.231	25
Ghana	27	48	36	34	7.034	22
Greece	26	54	38	38	8.019	25
Hong Kong	70	87	78	77	3.933	25
Hungary	35	55	44	44	6.468	25
Iceland	76	93	82	82	5.047	22
India	26	47	34	35	4.924	24
Iran	25	36	28	28	2.678	17
Iraq	16	22	19	18	1.886	17
Ireland	69	86	75	75	4.260	25
Italy	30	57	45	45	5.951	25
Kazakhstan	20	34	25	25	3.679	21
Korea, South	34	59	46	47	7.591	25
Kosovo	32	39	34	34	1.987	20
Latvia	27	71	57	60	11.411	22
Lebanon	21	30	26	27	2.971	20
Libya	14	28	20	20	3.774	20
Lithuania	38	60	51	53	6.694	21
Montenegro	41	53	47	48	3.838	20
Morocco	33	43	37	37	2.641	22
Netherlands	82	92	86	87	2.960	25
New Zealand	87	96	93	94	2.633	25
Nigeria	7	28	20	24	6.168	23
Norway	84	94	89	89	3.331	25
Pakistan	10	33	26	27	5.087	19
Philippines	23	38	32	34	4.165	18
Poland	42	65	57	60	6.186	16
Romania	30	63	47	47	8.986	20
Russia	16	29	24	24	3.929	21
Saudi Arabia	39	55	48	49	3.889	20
Serbia	24	42	33	37	6.660	18
Slovakia	35	51	45	46	4.666	22
Spain	43	76	61	61	7.012	25
Sri Lanka	25	40	33	37	6.054	15
Sweden	84	95	91	92	3.171	25
Switzerland	79	91	87	86	2.210	25
Syria	13	34	22	24	7.215	17
Thailand	19	38	28	30	6.801	25
Turkey	29	50	37	36	6.517	22
Ukraine	22	32	27	26	2.449	18
United Kingdom	74	88	83	85	4.403	25
United States of America	63	78	72	73	3.607	25
Vietnam	25	37	32	33	3.247	22

1 Note: Columns 2–4 show the minimum, maximum, mean, and median CPI scores of the countries represented in the sample. Column 5 shows the standard deviation, and column 6 show the number of CPI scores registered for each country in the years 1995–2019.

Table A.2:

Descriptive statistics by compliance.

Independent Variables	Noncompliant (N=222)	Compliant (N=1,752)	t	p >\|t\|
Female	0.129	0.179	–1.818	0.069
Age	52.055	49.330	3.452	0.001
Foreign	0.252	0.193	2.084	0.037
Residence time	46.000	44.826	0.939	0.348
Conflict	0.095	0.073	1.144	0.252
CPI score	22.973	22.114	0.690	0.490
External accountant	0.667	0.821	–5.444	0.000
Conflict employees	0.102	0.077	2.035	0.042
Ltd. company	0.550	0.871	–12.152	0.000
Salary system	0.437	0.729	–8.931	0.000
Work training	0.036	0.119	–3.693	0.000
Job advertisement	0.095	0.218	–4.299	0.000
Timesheet	0.430	0.494	–0.708	0.479
Terms	6.977	10.699	–17.317	0.000
Audit employees	3.516	4.037	–4.607	0.000
Self-employed	0.432	0.123	11.933	0.000

1 Note: Columns 2 and 3 show the mean value of the variable (Column 1) among compliant and noncompliant managers. Column 4 shows the t-value on the differences between compliant and noncompliant managers. We use the z-test (test of proportion) for binary outcomes and the t-test for continuous outcomes. Column 5 shows the p-value for the test. Female, foreign, conflict, external accountant, Ltd. company, salary system, work training, job advertisement, and self-employed are dummy variables. Age, residence time, CPI score, conflict employees, timesheet, terms, and self-employed are continuous variables. Female takes value 1 if the manager is female. Age value is years. Foreign takes value 1 if the manager is foreign. Residence time value is in years. Conflict takes the value 1 if the manager was exposed to armed conflict in the home country up to twenty-five years prior to migration. CPI score is the inverted CPI score of the manager’s country of origin at the year of arrival to Norway. External accountant takes the value 1 if the firm has outsourced external accountant services. Conflict employees is the fraction of employees in the firm exposed to armed conflict in the home country up to twenty-five years prior to migration. Ltd. Company takes the value 1 if the firm is registered as a private limited company. Salary system takes the value 1 if the firm has a digital salary system. Work training takes the value 1 if the firm has registered employees in the work training program subsidized by the NAV. Job advertisement takes the value 1 if the firm has advertised for vacancies in Norway. Timesheet describes the number of employees with incorrect timesheets. Terms describes number of terms (1–12) the firm report salaries or benefits for any employee to the NTA. Audit employees is the number of audited employees per firm (0–9). Self-employed takes the value 1 if the firm is registered as a sole proprietorship at the NTA.

Table A.3:

Represented sectors by NACE codes.

NACE	Description
H49.3.9	Other passenger land transport n.e.c.
B	Mining and quarrying
G47	Retail trade, except of motor vehicles and motorcycles
D35.3	Steam and air conditioning supply
A3	Fishing and aquaculture
N	Administrative and support service activities, excl. N81.2 - Cleaning activities
S96.0.2	Hairdressing and other beauty treatment
S96.0.4	Physical well-being activities
Q	Human health and social work activities
C	Manufacturing
J	Information and communication
A1	Crop and animal production, hunting, and related service activities
R	Arts, entertainment, and recreation
H49	General land transport (mainly freight)
F43.341	Paints, coatings (other finishing without carpentry)
F41	Construction of buildings
F42	Civil engineering
I55	Accommodation
M69.2	Accounting, bookkeeping, and auditing activities; tax consultancy
N81.2	Cleaning activities
I56	Food and beverage service activities
F43.3.2	Joinery installation
H	Transport and storage excluding land transport
E	Water supply; sewerage; waste management and remediation activities
G45.2	Maintenance and repair of motor vehicles
	Missing NACE code

Table A.4:

Conflict frequency.

Country	Freq.	%	Cum.
Turkey	21	14.09	14.09
Pakistan	17	11.41	25.50
Iraq	12	8.05	33.56
China	10	6.71	40.27
Serbia	10	6.71	46.98
India	9	6.04	53.02
Iran	8	5.37	58.39
Sri Lanka	8	5.37	63.76
Vietnam	8	5.37	69.13
Thailand	7	4.70	73.83
US	4	4.70	78.52
Ethiopia	3	2.68	81.21
Afghanistan	3	2.01	83.22
Lebanon	3	2.01	85.23
Macedonia	3	2.01	87.25
UK	3	2.01	89.26
Eritrea	2	1.34	90.60
Morocco	2	1.34	91.95
Russia	2	1.34	93.29
Algeria	1	0.67	93.96
Australia	1	0.67	94.63
Columbia	1	0.67	95.30
Egypt	1	0.67	95.97
El Salvador	1	0.67	96.64
Philippines	1	0.67	97.32
Libya	1	0.67	97.99
Niger	1	0.67	98.66
Syria	1	0.67	99.33
Ukraine	1	0.67	100.00

GA model fitness function.
*Note:* Fitness is adjusted for R-squared on all variables.

Table A.5:

GA variable selection results.

Variable	Training	Validation
Ltd. company	1.159e-01 *** 2.480e-02	1.541e-01 *** 2.680e-02
Salary system	7.969e-02 *** 1.958e-02	1.093e-01 *** 2.039e-02
Work training	5.897e-10 ** 1.964e-10	–4.568e-11 1.655e-10
External accountant	1.059e-01 *** 2.295e-02	1.608e-01 *** 2.282e-02
Job advertisement	6.206e-02 ** 2.289e-02	–6.847e-03 2.250e-02
Timesheet	1.710e-10 ** 5.556e-11	1.339e-10 ** 5.012e-11
Terms	2.301e-02 *** 3.226e-03	2.447e-02 *** 3.282e-03
Conflict employees	–1.115e-01 ** 3.992e-02	–8.199e-02 + 4.341e-02
Constant	4.193e-01 *** 4.358e-02	3.078e-01 *** 4.094e-02

1 Note: Standard errors in parentheses.

1*** p<0.001

1** p<0.01

1 p<0.05

1+ p<0.10

Table A.6:

LASSO variable selection results.

Variable	Training	Validation
Ltd. company	1.103e-01 1.131e-01	1.360e-01 9.652e-02
Self-employed	–1.215e-02 1.151e-01	–1.750e-02 9.861e-02
Salary system	8.072e-02 *** 1.966e-02	1.088e-01 *** 2.040e-02
Work training	5.962e-10 ** 1.973e-10	–4.186e-11 1.656e-10
External accountant	9.407e-02 *** 2.297e-02	1.619e-01 *** 2.291e-02
Audit employees	–3.997e-03 5.409e-03	4.075e-03 5.717e-03
Timesheet	3.997e-03 5.409e-03	–4.075e-03 5.717e-03
Terms	2.454e-02 *** 3.286e-03	2.394e-02 *** 3.313e-03
Conflict employees	–1.169e-01 ** 4.006e-02	–8.007e-02 + 4.351e-02
Constant	4.448e-01 *** 1.203e-01	3.147e-01 ** 1.023e-01

1 Note: Standard errors in parentheses.

1*** p<0.001

1** p<0.01

1 *p<0.05

1+ p<0.10

Table A.7:

Results from the OLS fixed effects models on four dependent variables.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
Female	0.013 (0.011)	0.015 (0.010)	–0.005 (0.012)	0.022* (0.009)	0.022+ (0.012)	0.020 (0.014)	–0.001 (0.010)	0.001 (0.010)	0.003 (0.011)	0.003* (0.001)	0.003+ (0.002)	0.003 (0.002)
Age	–0.001* (0.000)	–0.001** (0.000)	–0.001* (0.001)	–0.001*** (0.000)	–0.001** (0.000)	–0.001** (0.000)	–0.001+ (0.000)	–0.001* (0.000)	–0.001* (0.000)	–0.000 (0.000)	–0.000 (0.000)	–0.000 (0.000)
Foreign=1	–0.031 (0.026)	–0.032 (0.031)	–0.034 (0.028)	0.018* (0.009)	0.022** (0.008)	0.026** (0.009)	–0.015 (0.020)	–0.018 (0.016)	–0.025 (0.015)	–0.002 (0.004)	–0.003 (0.005)	–0.002 (0.005)
<5	–0.014 (0.066)	–0.034 (0.073)	–0.043 (0.068)	–0.112+ (0.066)	–0.127* (0.063)	–0.126* (0.060)	–0.003 (0.034)	–0.021 (0.038)	–0.017 (0.040)	–0.036 (0.033)	–0.028 (0.037)	–0.030 (0.039)
5–10	–0.027 (0.030)	–0.032 (0.031)	–0.036 (0.029)	–0.005 (0.015)	–0.015 (0.021)	–0.012 (0.023)	–0.019 (0.029)	–0.025 (0.025)	–0.025 (0.025)	0.001 (0.001)	–0.000 (0.002)	–0.001 (0.002)
Conflict	0.085** (0.027)	0.103** (0.034)	0.099** (0.028)	–0.038+ (0.022)	–0.004 (0.021)	–0.003 (0.022)	–0.030 (0.022)	–0.022 (0.023)	–0.011 (0.024)	–0.004 (0.003)	–0.003+ (0.002)	–0.003+ (0.001)
CPI score	–0.000 (0.000)	–0.001 (0.000)	–0.001+ (0.000)	0.000 (0.000)	–0.000 (0.000)	–0.000 (0.000)	0.001 (0.000)	0.001* (0.000)	0.001+ (0.000)	0.000 (0.000)	0.000 (0.000)	0.000 (0.000)
External accountant	0.018 (0.012)	0.021+ (0.012)	0.025+ (0.013)	0.004 (0.009)	0.011 (0.010)	0.010 (0.010)	0.083*** (0.016)	0.072*** (0.016)	0.070*** (0.016)	0.013* (0.006)	0.012* (0.006)	0.013* (0.006)
Conflict employees	–0.122+ (0.071)	–0.128* (0.062)	–0.149** (0.055)	–0.002 (0.026)	–0.005 (0.024)	–0.005 (0.022)	–0.009 (0.028)	–0.014 (0.031)	–0.024 (0.033)	0.003 (0.002)	0.004 (0.003)	0.007+ (0.004)
Constant	1.007*** (0.018)			1.030*** (0.016)			0.920*** (0.021)			0.990*** (0.007)
Observations	1,959	1,936	1,928	1,959	1,936	1,928	1,959	1,936	1,928	1,959	1,936	1,928
R-squared	0.013	0.139	0.223	0.015	0.211	0.240	0.035	0.171	0.203	0.019	0.085	0.095

1 Note: Estimated coefficients from the OLS model run on Tax deduction (1-3); Payroll accounts (4-6); Monthly reporting (7-9) and General accounts (10-12). Standard errors in parentheses. Columns 1, 4, 7, and 10 are from OLS without fixed effects; columns 2, 5, and 11 are from OLS with fixed effects on NTA auditor; and columns 3, 6, and 12 are from OLS with fixed effects on NTA auditor and NACE code (two-digit). Residence time >10 years is the reference category and therefore is omitted in the table. Standard errors are clustered by NACE code.

1*** p<0.001

1** p<0.01

1* p<0.05

1+ p<0.10

Table A.8:

Results from the GA models on four dependent variables

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
Ltd. company	0.160*** (0.029)	0.157*** (0.026)	0.123*** (0.023)	–0.002 (0.010)	0.003 (0.011)	0.004 (0.014)	0.009 (0.011)	0.011 (0.010)	0.004 (0.012)	–0.001 (0.004)	–0.001 (0.003)	–0.001 (0.005)
Salary system	0.027 (0.019)	0.030 (0.020)	0.029 (0.020)	0.064*** (0.010)	0.095*** (0.015)	0.096*** (0.015)	0.023+ (0.011)	0.029+ (0.016)	0.026+ (0.016)	0.002 (0.003)	0.002 (0.005)	0.001 (0.006)
Work training	0.019 (0.014)	0.010 (0.012)	0.008 (0.013)	0.010+ (0.006)	–0.003 (0.005)	–0.006 (0.006)	0.012 (0.010)	0.021* (0.009)	0.019* (0.009)	–0.004 (0.004)	–0.004 (0.004)	–0.004 (0.004)
External accountant	0.041** (0.013)	0.033* (0.013)	0.034* (0.014)	0.019** (0.007)	0.025** (0.009)	0.024* (0.009)	0.091*** (0.018)	0.080*** (0.018)	0.078*** (0.018)	0.014* (0.006)	0.014* (0.006)	0.015* (0.006)
Job advertisement	0.012* (0.006)	0.014* (0.006)	0.003 (0.005)	0.009+ (0.005)	0.009 (0.005)	0.007 (0.005)	0.007 (0.008)	0.003 (0.007)	0.012 (0.008)	0.004+ (0.002)	0.006* (0.002)	0.006* (0.003)
Timesheet	0.003 (0.005)	0.002 (0.006)	0.002 (0.006)	0.003+ (0.002)	0.002 (0.002)	0.001 (0.002)	0.001 (0.003)	–0.002 (0.003)	0.001 (0.003)	–0.000 (0.000)	0.001 (0.001)	0.000 (0.001)
Terms	0.016*** (0.003)	0.016*** (0.004)	0.015*** (0.003)	0.010*** (0.003)	0.009*** (0.002)	0.008*** (0.002)	0.002 (0.001)	0.003* (0.002)	0.003 (0.002)	0.001 (0.001)	0.001 (0.001)	0.001 (0.001)
Conflict employees	–0.066* (0.026)	–0.056* (0.025)	–0.074** (0.025)	–0.051* (0.023)	–0.026 (0.022)	–0.025 (0.023)	–0.018 (0.022)	–0.011 (0.023)	–0.017 (0.029)	0.004* (0.002)	0.005 (0.005)	0.010+ (0.006)
Constant	0.594*** (0.076)			0.812*** (0.030)			0.843*** (0.025)			0.974*** (0.014)
Observations	1,897	1,872	1,864	1,897	1,872	1,864	1,897	1,872	1,864	1,897	1,872	1,864
R-squared	0.161	0.261	0.286	0.103	0.335	0.350	0.041	0.187	0.220	0.016	0.088	0.099

1 Note: Estimated coefficients from LASSO model run on Tax deduction (1-3); Payroll accounts (4-6); Monthly reporting (7-9), and general accounts (10-12). Standard errors in parentheses. Columns 1, 4, 7, and 10 are from OLS without fixed effects; columns 2, 5, and 11 are from OLS with fixed effects on NTA auditor; and columns 3, 6, and 12 are from OLS with fixed effects on NTA auditor and NACE code (two-digit). Residence time >10 years is the reference category and therefore omitted in the table. Standard errors are clustered by NACE code.

1*** p<0.001

1** p<0.01

1* p<0.05

1+ p<0.10.

Table A.9:

Results from the LASSO models on four dependent variables

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
Ltd. company	0.099 (0.093)	0.115 (0.092)	0.124 (0.093)	–0.025* (0.012)	–0.009 (0.012)	–0.000 (0.012)	0.022 (0.076)	0.024 (0.058)	0.026 (0.061)	–0.007* (0.003)	–0.004 (0.003)	–0.003 (0.003)
Self-employed	–0.063 (0.095)	–0.043 (0.095)	0.005 (0.097)	–0.023 (0.014)	–0.011 (0.019)	–0.000 (0.020)	0.011 (0.079)	0.011 (0.063)	0.023 (0.066)	–0.006 (0.004)	–0.003 (0.003)	–0.002 (0.005)
Salary system	0.027 (0.019)	0.029 (0.020)	0.027 (0.020)	0.063*** (0.010)	0.094*** (0.015)	0.094*** (0.015)	0.023* (0.011)	0.029+ (0.016)	0.027+ (0.016)	0.002 (0.003)	0.002 (0.005)	0.001 (0.005)
Work training	0.018 (0.015)	0.010 (0.012)	0.006 (0.013)	0.010 (0.007)	–0.004 (0.006)	–0.007 (0.007)	0.015 (0.009)	0.023** (0.008)	0.022* (0.009)	–0.004 (0.004)	–0.004 (0.004)	–0.003 (0.004)
External accountant	0.042** (0.013)	0.034* (0.014)	0.037* (0.015)	0.020** (0.007)	0.026** (0.009)	0.026** (0.009)	0.089*** (0.019)	0.079*** (0.018)	0.076*** (0.018)	0.014* (0.006)	0.014* (0.006)	0.015* (0.006)
Audit employees	0.006 (0.003)	0.008* (0.004)	0.010* (0.005)	0.006** (0.002)	0.006** (0.002)	0.007*** (0.002)	–0.004+ (0.002)	–0.004 (0.003)	–0.002 (0.003)	0.001 (0.001)	0.001 (0.001)	0.001 (0.001)
Timesheet	0.002 (0.004)	0.000 (0.005)	0.000 (0.005)	0.002 (0.002)	0.000 (0.002)	–0.001 (0.002)	0.002 (0.003)	–0.001 (0.003)	0.001 (0.003)	–0.000 (0.000)	0.000 (0.001)	0.000 (0.001)
Terms w/benefits	0.015*** (0.004)	0.016*** (0.003)	0.014*** (0.003)	0.010*** (0.003)	0.008** (0.002)	0.007** (0.002)	0.003+ (0.002)	0.004* (0.002)	0.004+ (0.002)	0.001 (0.001)	0.001 (0.001)	0.001 (0.001)
Conflict employees	–0.068** (0.025)	–0.059* (0.024)	–0.076** (0.024)	–0.053* (0.023)	–0.029 (0.022)	–0.027 (0.023)	–0.017 (0.022)	–0.010 (0.023)	–0.017 (0.029)	0.004* (0.002)	0.004 (0.005)	0.009+ (0.006)
Constant	0.642*** (0.096)			0.820*** (0.033)			0.843*** (0.072)			0.977*** (0.013)
Observations	1,897	1,872	1,864	1,897	1,872	1,864	1,897	1,872	1,864	1,897	1,872	1,864
R-squared	0.162	0.263	0.289	0.105	0.337	0.353	0.042	0.187	0.220	0.016	0.087	0.098

1 Note: Estimated coefficients from LASSO model run on Tax deduction (1-3); Payroll accounts (4-6); Monthly reporting (7-9) and general accounts (10-12). Standard errors in parentheses. Columns 1, 4, 7, and 10 are from OLS without fixed effects; columns 2, 5, and 11 are from OLS with fixed effects on NTA auditor; and columns 3, 6, and 12 are from OLS with fixed effects on NTA auditor and NACE code (two-digit). Residence time >10 years is the reference category and therefore omitted in the table. Standard errors are clustered by NACE code.

1*** p<0.001

1** p<0.01

1* p<0.05

1+ p<0.10

Table A.10:

Results from the OLS fixed effects models on CPI score and conflict.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
CPI score	–0.000 (0.000)		0.000(0.001)	–0.000 (0.000)		–0.000 (0.000)	–0.001 (0.000)		–0.001+ (0.000)
Conflict		–0.031 (0.027)	–0.047 (0.043)		–0.007 (0.029)	0.003(0.030)		–0.026 (0.027)	0.003 (0.025)
Constant	0.896*** (0.012)	0.890*** (0.007)	0.886*** (0.014)
Observations	1,959	1,974	1,959	1,936	1,951	1,936	1,928	1,943	1,928
R-squared	0.000	0.001	0.001	0.139	0.135	0.139	0.211	0.206	0.211

1 Note: Estimated coefficients model run on Compliance from CPI score (columns 1, 4, and 7); Conflict (columns 2, 5, and 8) and both (columns 3, 6, and 9). Standard errors in parentheses. Columns 1, 2, and 3 are from OLS without fixed effects; columns 4, 5, and 6 are from OLS with fixed effects on NTA auditor; and columns 7, 8, and 9 are from OLS with fixed effects on NTA auditor and NACE code (two-digit). Standard errors are clustered by NACE code.

1*** p<0.001

1 p<0.01

1 p<0.05

1+ p<0.10

Table A.11:

Fixed effects results from OLS, GA, and LASSO model runs.

	(1)	(2)	(3)
Female	0.014 (0.021)
Age	–0.003*** (0.000)
Foreign	–0.050* (0.023)
<5	–0.165+ (0.095)
5–10	–0.039 (0.036)
Conflict	0.056* (0.027)
CPI score	–0.000 (0.000)
External accountant	0.092*** (0.023)	0.111*** (0.021)	0.113*** (0.023)
Conflict employees	–0.152* (0.066)	–0.119* (0.048)	–0.124* (0.047)
Ltd. company		0.103***	0.145
Salary system		(0.022) 0.103***	(0.103) 0.102***
Work training		(0.029) 0.024	(0.029) 0.024
Job advertisement		(0.017) 0.019+ (0.010)	(0.017)
Self-employed			0.050 (0.107)
Audit employees			0.010* (0.004)
Timesheet		0.003	0.001
Terms		(0.007) 0.021***	(0.006) 0.020***
Observations	1,928	(0.003) 1,864	(0.003) 1,864
R-squared	0.236	0.313	0.314

1 Note: Estimated coefficients from Fixed effects on NTA auditor and NACE code (two-digit) model runs. Standard errors in parentheses. Column (1) is from OLS, column (2) is from GA, and column (3) is from LASSO. Residence time >10 years is the reference category and therefore is omitted in the table. Standard errors are clustered by NACE code.

1*** p<0.001

1 p** <0.01

1 p* <0.05

1+ p<0.10

References

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Articles in this issue

DOI: https://doi.org/10.2478/ntaxj-2024-0002 | Journal eISSN: 2246-1809

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Language: English

Page range: 1 - 29

Submitted on: Oct 24, 2022

Accepted on: Apr 11, 2024

Published on: May 20, 2025

Published by: DJØF Publishing, Nordic Tax Research Council

In partnership with: Paradigm Publishing Services

Keywords:

Audit,

JEL:

H2,

H26,

M41,

M48,

M54

Related subjects:

Business and economics,

Political economics,

Public finance and fiscal theory,

Business management,

Business law,

Law,

History, philosophy and sociology of law,

Public law,

Tax and accounting law

© 2025 Thomas Lange, Anne May Melsom, published by DJØF Publishing, Nordic Tax Research Council
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Volume 2024 (2024): Issue 1 (December 2024)

Tax Compliance among Managers: Evidence from Randomized Audits1

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Paradigm

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