Question

Question:

Critically examine how tax administration influences taxpayer behaviour in terms of tax compliance. You should frame your argument by relating tax administration to the tax compliance that have been identified in the existing literature: sense of trust and fairness for the country USA/UK.

Answer 1

Answer:

• So as to energize tax compliance in the nation , vital steps must be taken by the tax administration which goes about as drivers in affecting citizens in being compliant :
• The Following are the Drivers

1. Driver- Personal and Social Belief Norms

Personal and social belief norms - Importance of this driver is immense in inculcating the tax compliance in society . The impact of taxes on social welfare activities and various advertisement and campaigning by tax administration of the country fosters a sense of paying tax n time for social economical robust health of the country .sessions in US and UK shows such program of personal and social belief after tax payments has increased compliance by about 5- 5.75 % in last fiscal yr .

2. Driver- Levying Penalty

Deterrence-Importance of this driver to tackle tax evasion by making penalties explicit in tax correspondence can increase tax compliance .In UK with various experiments it has been found out that the baseline deterrence treatment in the tax payment and payment reminders states the average penalty of euro 209 explicitly .In tax payment reminders also the penalty ranges from euro 5 - euro 1250 , resulting in 10-200 percent of tax compliance .

3.Driver- Complexity

Complexity in tax payments and filing tax returns makes individual hesitant and hence compliance could not be followed on a larger scale .Research has shown that simplifying communication by the tax administration consistently improves tax compliance in Belgium . Simplifications makes tax payers pay taxes on time and makes both late filers and late payers comply more swiftly than they would otherwise .