Tax Compliance, Technology, Trust, and Inequality in a Post-Pandemic World

James Alm ()

No 2404, Working Papers from Tulane University, Department of Economics

Abstract: Ensuring compliance with the tax laws is an enduring challenge for all governments, and government strategies are constantly evolving as circumstances change. Recently, countries around the world have experienced some major shocks, shocks that are already affecting tax compliance and the policies that governments utilize to maintain compliance. In this paper I examine the effects of two especially important shocks -- technological shocks and SARS-CoV-2 pandemic shocks -- on tax compliance in the years ahead. I argue first that many of these changes in technology will improve the ability of governments to improve tax compliance, mainly by increasing the flow of information to governments, while at the same time opening up new avenues by which some individuals and some firms can evade (and avoid) taxes. I then argue that the pandemic and the associated policies enacted by governments will affect compliance in uncertain ways, in large part because of the conflicting effects of the pandemic and government policies on trust in government. At this point it is unclear which of these trends will dominate, so that the effects of technology and the pandemic on the overall level of tax compliance in a post-pandemic world are uncertain. Even so, I believe that the distributional effects of these shocks are more predictable. Indeed, I argue that these two shocks -- especially the technological shocks -- seem virtually certain to increase economic inequality, regardless of their actual impacts on the level of tax compliance. The challenge facing governments is devising policies to counter these trends.

Keywords: Tax compliance; technology; digitalization; trust; inequality; technology (search for similar items in EconPapers)
JEL-codes: D63 H22 H26 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-iue, nep-pbe, nep-pub and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:2404

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