Law Commons^™

Tax Compliance And Norm Formation Under High-Penalty Regimes, Susan Morse

Susan Cleary Morse

Skepticism about the potential of moral appeals relating to tax compliance -- for example, as applied to large groups of individual taxpayers outside a wartime context -- has resulted in the absence of a theory about how salient government communication can further tax compliance. This Article fills that gap. It provides a comprehensive theory of tax compliance and norm formation under high-penalty regimes from the starting point of a non-compliance norm.

The theory explains the roles of and mutually reinforcing relationships between the compliance mechanisms of deterrence, separation and reputation signaling. The success of these mechanisms depends on the presence …

Tax Compliance And The Love Molecule, Susan Morse

Susan Cleary Morse

If oxytocin is the source of human reciprocity, then perhaps storytelling that evokes close human relationships is the key to using reciprocity to further tax compliance.

An Analysis Of The Fbar High-Penalty Regime, Susan C. Morse

Susan Cleary Morse

Report of Foreign Bank and Financial Accounts (“FBAR”) requirements seek to solve a pressing information asymmetry problem relating to U.S. persons’ investment in non-U.S. financial accounts. FBAR reporting requires U.S. taxpayers themselves to disclose offshore account information to the U.S. government.

Noncompliance with FBAR requirements carries high potential penalties. These high penalties could serve some or all of the goals of deterrence, separation or signaling.

To maximize the chance that a high-penalty regime will succeed at one or more of these goals, taxpayers should perceive that they actually face painful penalties for noncompliance and/or worthwhile rewards for compliance. They should …

Revisiting Global Formulary Apportionment, Susan Morse

Susan Cleary Morse

This Article examines global destination sales-based formulary apportionment ("DSFA"). It questions whether unilateral U.S. adoption of a DSFA tax would prompt other countries to follow suit, identifying on one hand factors that could encourage a productive capacity shift to the DSFA-adopting jurisdiction and on the other hand origin-based incentives such as business-to-business sales that could encourage the movement of capital investment to jurisdictions other than the adopting jurisdiction. It also analyzes several points of comparison between a globally adopted DSFA tax and the existing separate accounting corporate tax system. These include the potential of transfer pricing and other reform effort …

Qualified Intermediary Or Bust?, Susan C. Morse

Susan Cleary Morse

In reaction to news about wealthy U.S. individuals hiding assets in non-U.S. bank accounts, the Obama administration has proposed statutes that would make non-qualified intermediary (NQI) status more unattractive for non-U.S. banks. The proposals appear to push non-U.S. banks into qualified intermediary (QI) agreements with the IRS, and under accompanying proposals QIs would undertake expanded responsibilities to automatically provide information about U.S. clients to the IRS. But models other than the QI system could also serve the enforcement goal of international automatic information exchange. Fortunately, the proposals also would permit Treasury and the IRS to craft administrative exceptions to adverse …

Using Salience And Influence To Narrow The Tax Gap, Susan Morse

Susan Cleary Morse

Most self-employed and small business taxpayers cheat on their taxes. In fact, in the aggregate, they fail to pay about half the tax they owe to the government, and this unpaid tax amounts to about $150 billion annually. This amount is about half the "tax gap," or the amount of tax due that the federal government does not collect.

This paper argues that more salient government communications and greater attention to principles of influence would improve existing and proposed policies to encourage self-employed and small business taxpayers to pay their taxes. Reversing the widespread tax evasion among self-employed and small …

Cash Businesses And Tax Evasion, Susan Cleary Morse, Stewart Karlinsky, Joseph Bankman

Susan Cleary Morse

This paper offers interview data on the tax compliance behavior of small cash businesses. We find that such businesses systematically underpay income, employment and sales taxes through income underreporting. The results show that participation in a parallel cash economy facilitates tax evasion and that cash business owners seek out sympathetic tax preparers. We also find that norms and opportunity, but not equity or tax complexity, strongly influence such decisions to underreport income. The behavior patterns indicated by our data suggest specific policy tactics in the effort to close the tax gap.