Question

Explain how does appliing the tax system to collect other obligations affect tax compliance?

Answer 1

• Tax penalties determine the standard of conduct.
• This satisfies a taxpayer's obligations for the Government
• These distinguish compliant taxpayers from non-compliant taxpayers.

As per Michael Doran's, Tax Penalties, and, Tax compliance, published in, Harvard Journal of Legislation there is a relationship between tax penalties, and, tax compliance. The relationship is instrumental. Tax penalties are only to support tax compliance. Tax penalties determine the standard of conduct. They distinguish non-compliant taxpayers, from compliant tax payers. It distinguishes non-compliant taxpayers, and, compliant taxpayers.

The model accounts for a high level of tax compliance.

The deterrence model assumes that the taxpayer are:

• rational actors
• amoral
• Cannot match high levels of taxpayer compliance, and, penalties of current law

The norms model

• Posits a black box of taxpayer motivation
• Supplements the deterrence story
• Appeals to social, and, personal-tax compliance norms