From the research: Can tax designation help increase the willingness to pay taxes?

This paper deals with the question how people follow tax rules and pay their taxes. There are two main approaches to understanding tax compliance. The first one, called “tax enforcement” explains compliance by how strict the rules and punishments for not paying taxes are, and at how probable it is to get caught. The second one, “tax morale”,emphasizes social norms, and people’s attitudes and beliefs about tax paying (for example satisfaction with public services).

In this paper, the authors explore a novel concept within the tax morale approach, suggesting that allowing taxpayers to choose how a small part of their tax money is spent may enhance their compliance. This so-called “tax designation” mechanism has been even implemented in some countries. In these countries, people can choose to send a portion of their taxes to a charity or church of their liking. The primary goal of this scheme was to increase revenue of this not-for-profit organizations, but recent research argued it may even encourage them to pay their taxes more willingly.

The authors doc. PhDr. Lubomír Cingl, Ph.D., Ing. Tomáš Lichard, Ph.D. a Ing. Tomáš Miklánek, M.A., Ph.D. tested this idea by conducting an experiment with different types of Czech taxpayers (self-employed and employees) to see if letting them decide where a small part of their taxes go would increase their compliance. The results show that it did not have a big effect on self-employed, while it did have a small positive impact on employees, whose income, however, is often automatically reported by their employers with a small possibility to evade taxation. Other factors like their personal values and willingness to take risks seem to play a more significant role.