Devising strategies to improve tax compliance depends critically on understanding the motivations of individuals (and firms) in choosing to pay - or not to pay - their legally due tax obligations, on examining the various types of evidence on compliance, and on pursuing policies that are consistent with these motivating factors and the associated evidence. Accordingly, I focus in this paper on three questions. First, why do people pay their taxes? Here I discuss the various insights and evidence from theoretical, empirical, and experimental research on evasion. Second, what are the implications of this research for tax administration? I suggest that this research argues for three different "paradigms" for tax administration policies. Third, how can this evidence be used to devise policies that encourage people in paying their taxes - or that discourage them in cheating on their taxes? I present a range of specific policies that research has shown can be effective in reducing tax evasion.
About Professor James Alm
James Alm is Professor and Chair of the Department of Economics at Tulane University. Previously, he was Regents Professor in the Department of Economics at the Andrew Young School of Policy Studies at Georgia State University in Atlanta, Georgia, where he served as Chair of the Department and Dean of the School. He has also taught at Syracuse University and at the University of Colorado at Boulder. He earned his master's degree in economics at the University of Chicago and his doctorate at the University of Wisconsin-Madison. His teaching and research are in the area of public economics. Much of his research has examined the responses of individuals and firms to taxation, in such areas as tax compliance, the tax treatment of the family, income reporting, tax reform, the line item veto, social security, housing, indexation, and tax and expenditure limitations. His work has been published in leading economics journals, and he is the author of nine books, including the recently published The Economics of Taxation. He has also worked extensively on fiscal and decentralization reforms overseas, including projects in Bangladesh, Indonesia, Jamaica, Grenada, Turkey, Egypt, Hungary, China, the Philippines, the Russian Federation, Uganda, Nigeria, India, Colombia, Puerto Rico, Nepal, Ukraine, Pakistan, South Africa, and Tunisia. He is currently Editor of Public Finance Review, and is on the editorial board of several other economics journals.
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