Researches On The Compliance Costs In Foreign Countries: Experience And Reference

Compliance costs are the expenses that taxpayers have to pay in the illegal activities obeying the tax laws. Although this part of costs has been concerned as early as in the Adam Smith's minimum taxation principle, governments kept neglecting them due to their obscurity. The compliance costs in tax system were estimated by Haig firstly in 1934. After 1980s, the studies of compliance costs were performed by the governments of England and other countries, and compliance costs were considered during the policy-making of tax laws. The growing severity of tax evasion contributes to the concerns of compliance costs by these countries. According to the results of investigation and estimation on compliance costs, the mounts of compliance costs are so huge and cumulative to distort the economy greatly and encourage the incompliance activities of taxpayers. The problem of tax evasion is also faced by our country, but few studies are conducted in the associated filed of compliance costs.The primary objective of this study is to characterize a theoretical model based upon researches and practical experiences of foreign governments, and provide references for the taxation decision-making in the context of the current conditions of our country. This essay also uses the evasion of personal income taxes as case study, and presents a new perspective for the usage of compliance costs in practices.There are some important aspects in this study: (1) a full description and summarization for the results by foreign researches on compliance costs; (2) in the case study of personal income tax, a quantitative analysis is performed for the impacts of compliance costs on the compliance activities of taxpayers; (3) Aconclusion that the principle of tax police-making is not to eliminate compliance costs, but to minimize the tax costs; (4) it is presented in this study that our country should take compliance costs into account in the reformation of tax system, and some suggestions are presented based upon a qualitative analysis on the situation of compliance costs in our country. The second and the third may be some creative among them.