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Based on the fact that most people tend to cheat a bit when they see the marginal cost of doing something wrong just this once always seems low, it might seem hard to change the behavior of cheating in the case of IRS. Surprisingly, people tend to pay their taxes at much higher rates than they should. There are many factors that leads to high tax compliance.
Just thinking about morality shrinks our fudge factor could make us more honest. Despite Morality training usually will result in no beneficial long-term effect, reminding people of morality and ethics just before being tempted could dramatically make a difference to reduce or even prevent the chances of cheating. IRS uses this technique to warn taxpayers to think about ethics and morality. Deterrence threats and civic norms can also effectively raise tax compliance. The government deter citizens into paying taxes usually by the threat of a nonymous ways such as audits, fines, and legal prosecution. The model of rational crime can be applied in the case of IRS as well. We often rationalize things very quickly to determine the cost and benefit before implementing an action. Since the cost of cheating in this case will result in negative self-image and will even lead to sentence to jail, the benefit of actually being honest and pay the actual amount of tax seems a lot better thus people choose not to cheat.
Social norms can also influence taxpayers by emphasizing the importance of voluntary compliance. By reminding taxpayers to be good citizens of the nation, we can improve taxpayer’s sense of civic duty and improve their morality. This technique is similar to the example in class of recalling the ten commandments before cheating. The rate of cheating falls to zero after they answer the question about the ten commandments regardless of their performance. Also, by providing data for the result of cheating could also lead to cheat reduction. Because one aspect of cheating is related to the surrounding environment. If one taxpayer sees other taxpayers cheat on their tax reports, chances are the rate of cheating will dramatically increase, because the marginal cost of cheating seems low when everyone around cheats and because everyone cheats, the taxpayer will not think about self-image and self-esteem.
The IRS could further increase their taxpayer’s compliance by asking the taxpayers question in the beginning of the form like “would you like to give ten dollars to the organization to fight for corruption?”. By doing this will not violate the double signature policy and will actually help taxpayers to think more rational and reduce the rate of cheating. If people commit money toward something, a good chance that later on, they will continue acting in a more appropriate and honest behavior and thus lead to an increase in taxpayer’s compliance. Another way that IRS could increase taxpayer’s compliance can be done by improve government performance. If citizens cheat a lot on their tax reports, that might also indicate that the government is corrupted. Chinese government is an perfect example of how corrupted government can lead to taxpayers to cheat. Misuse of money and resources will lose people’s faith in the government. generally, citizens are more willingly to pay the correct taxes if the government delivers good services and welfare in return. Studies suggest that a country’s government corruptness is linearly correlated with citizen’s rate of cheating. Overall, the key to reduce cheating is to always keep in mind that morality is what makes people succeed.