Governmental policies to reduce tax evasion: coerced behavior versus services and values development

Governments generally have at their disposal two types of tax compliance policies. One set of policy options coerces tax compliance by increasing risks for practicing tax evasion, while a second set of policies emphasizes development of supportive taxpaying values among citizens through service improvement and informational strategies. Tax agencies tend to favor coercive policies, but empirical research suggests that such policies are not in themselves fully adequate to fight tax evasion. Four hypotheses are offered which suggest the utility of service and values based policies and the need for increased investment in those areas of tax administration.