To boost revenue collection, tax reforms usually focus on either increasing the cost of non-compliance, by strengthening enforcement, or on facilitating compliance by lowering its cost. Yet, despite significant investments in both, voluntary compliance remains sluggish in many countries. In part, this is because of a lack of trust in the system. Without a credible fiscal contract between citizens and the government, taxpayers will be hesitant to pay what they owe. However, although trust matters, it is less clear how it interacts with enforcement and facilitation and what this means for the design of the tax reforms.
During this session, the Global Tax Team presented Innovations in Tax Compliance: Conceptual Framework which addresses this question. In addition to enforcement and facilitation, the framework emphasizes the importance of reform strategies that enhance trust in tax systems and confront political barriers to reform, to address binding constraints on tax compliance. The team presented the operational tools and discussed how they can be leveraged to contribute to better informed tax reforms.