Study Of Framing Effect On Individual Tax Compliance

As a global government issue, tax compliance behavior has always been one of themost important points in financial areas. After thirty years of development in individualincome tax, the total income is increasing quickly and individual income tax system isimproved constantly. However, there is still some serious tax non-compliancephenomenon, of which high-income people is particularly prominent. The problem of taxnon-compliance not only causes huge losses of fiscal revenue, but also destroys the socialequity, which is not conducive to social harmony.In order to promote the compliance of individual taxpayers, this research gets rid ofproperly rational decision-maker hypothesis under traditional tax compliance theory,studies framing effect which is an irrational phenomenon, analyzes the psychology oftaxpayers, and explains the conclusion with the prospect theory which is conforms to thereal behavior of taxpayers. The research is conducted on goal framing effect and riskychoice framing effect. First, an experiment is introduced to identify the influence of riskychoice framing effect on tax compliance behavior. The results show that risky choiceframing effect exists significantly in tax compliance behavior at all levers of the tax rateexcept the lowest lever and the significance of risky choice framing effect is strong moreand more with the tax rate rises. The withholding phenomenon that taxpayers in a refundposition are more compliant than those in a payment position is proved in the experiment.Second, a questionnaire is adopted to investigate whether goal framing effect affectstaxpayers’ behavior or not. The results find that goal framing effect exists significantly intaxpayers’ compliance decision making behavior, and subjects who read a positivelyframed message are more compliant than subjects who read a negatively framed message.Last, according to the research conclusion, the study advances some proposal, which is toimplement tax withholding system, to take message tactic and to reduce marginal tax rate.