Monday, October 30, 2006
Sagit Leviner (S.J.D. Candidate, Michigan) has posted A New Era of Tax Enforcement: From "Big Stick" to Responsive Rrgulation on SSRN. Here is the abstract:
This paper explores one possible solution to the problem of tax compliance. It is inspired by developments in regulation and tax administration abroad (specifically in Australia), and, particularly, it presents responsive regulation—a concept developed by Ian Ayres and John Braithwaite and recently implemented by the Australian tax administration--as an alternative approach to tax enforcement that is worth paying attention to. The responsive regulation approach is based on the proposition that effective enforcement requires a dynamic and gradual application of less to more severe sanctions and regulatory interventions. This range of sanctions and interventions should balance traditional authoritarian deterrence with strategies that rely on persuasion and encouragement through three states of communication: cooperation, toughness, and forgiveness. The Australian approach also advocates for a deeper understanding of the motivations, circumstances, and characteristics of taxpayers so that enforcement can be effectively tailored to deliver compliance. With responsive regulation, the intention is to preserve the basic principles of economic analysis that assume taxpayers are rational actors seeking to maximize their self-interest. But, responsive regulation also takes into consideration situations where taxpayers “irrationally” resist compliance; the role that social, moral, and ethical considerations play in affecting taxpaying behavior; and, particularly, the manner in which compliance can be shaped by the taxpayer-tax administration relationship. In recent years there has been a growing shift in the tax administration of the United States from emphasizing “bright-line” rules and regulations as well as their enforcement through penalties and audits toward a more balanced set of strategies that highlights quality of service and respectful and fair treatment of taxpayers. With the Australian tax administration taking what can be seen as the next step forward in terms of enforcement and research in compliance, the U.S. may find that the Australian approach is quite relevant and fits with the current trends in both countries.