Tax evasion is a key societal challenge and causes considerable losses in government revenue. In the U.S., these losses are estimated to be about $500 billion, roughly the size of the federal government’s annual deficit.
Research: Moral Appeals Can Help Reduce Tax Evasion
But the effects wear off quickly.
July 20, 2017
Summary.
The classic approach to reducing tax evasion is to increase the probability of being detected and to increase penalties. However, in a new study, we show that moral motivation is important for tax compliance, and that a moral appeal in a letter from the tax authorities substantially reduces tax evasion. We find that the moral letters had about the same effect on the average as the detection letter. However, the effect of the moral letters comes from a smaller group of taxpayers than the effect of the detection letter. We also considered the long-term effects of the letters and found that only the detection letter had lasting impact on taxpayer behavior.