Part V discusses a possible explanation for the "tax compliance puzzle," arguing that the common taxpayer heuristic of a "red flag" going up with the government if one underreports tax is an example of the population's intuitive understanding that taxpayers who underreport tax have a significantly higher probability of audit than taxpayers who do not.
Therefore, the probability of audit given that T underreports tax on a return is not equivalent to the probability of audit given that T accurately reports tax on a return, and the probability of T experiencing an audit is not equivalent to the frequency with which G audits returns.
This means that the probability of audit if one underreports tax on a return will always be greater than the probability of audit if one does not underreport tax on a return, so long as the detection rate is greater than the overall underreporting rate.
Most taxpayers share a belief that if one underreports tax on a return, a "red flag" will go up and that return will have a higher probability of being audited.
Experience tells us that the question most relevant to taxpayers considering whether to report all tax on a return is, "what are my chances of getting audited if I underreport tax?" I have shown in this article that the difference in answers is significant based on whether one underreports.
Unmatched survey-reported drugs were further classified into one of two categories: survey overreports or omitted-pharmacy underreports. A prescription was assigned survey overreport status if there was any mention of that drug in the pharmacy file.
O2=Number of non-matched survey-only prescriptions that were deemed a result of omitted-pharmacy underreports
Table 2 Pharmacy Follow-Back Study Unweighted and Weighted Results of AWP Imputation, by Category: CY 1999 AWP Number of Unweighted Weighted Survey Reported Prescriptions Average Average All Matched (M) 73,519 $49.30 $49.47 Unmatched 23,359 53.45 53.62 Survey Overreports (01) 12,779 50.94 51.53 Pharmacy Underreports (02) 10,580 56.48 56.08 Pharmacy Reported All (P) 101,144 49.62 45.85 NOTES: AWP is average wholesale price.
A drug was assigned omitted-pharmacy underreport status if that drug name did not appear in the pharmacy data.
Restricted to underreporting follow-back participants, a multi-linear regression model was developed to determine which factors were predictive of the level of annualized underreported AWE The model produced an [R.sup.2] of 13.8 percent and showed that the following variables significantly increased the level of underreporting:
On its return for 1987, the corporation underreports
its taxable income.
In a broader sense, however, "FDA seriously underreports
pesticide residues in the food supply," Wiles charges.