Citizen Tax Compliance Issues

Unless most taxpayers show their willing and behavior to comply, the tax system won't run effectively. Although it is difficult to reach a level of complete compliance, something can be done to the mechanism designing to foster better taxpayer compliance, once we find out what factors affect taxpayer compliance.This essay aims to find out how to create a favorable environment and increase taxpayer compliance, through studying on the relationship between taxpayer compliance and the outside environment, which includes tax law institution, tax administration, government tax using system and social climate of tax.There are four sections in this essay:In Section One, definitions of taxpayer compliance, non-compliance are presented. It is argued that taxpayer compliance and tax compliance are two different concepts, and the latter includes the former. After types of compliance and non-compliance are classified, the focus is directed towards factors affecting taxpayer compliance, which are taxpayer's inner factors and the outside environment, the objective reasons. Taxpayer compliance is a complex phenomenon, which is affected not just by rational economic motives but by psychological factors as well. Moreover, either rational decision making or behavior derived from psychological factors is affected by the outside environment. For rational cost-benefit analyst, non-compliance outcomes due to opportunities perceived in the unfavorable environment; for emotional decision maker, non-compliance is likely to result due to fairness consideration, trust issue generated from the environment. Meanings of increasing taxpayer compliance are demonstrated before the section ends. In the next section, unfavorable finding comes out via research on status quo of individual income taxpayer compliance, that in China, due to complicated reasons, the level of taxpayer compliance is low.Section Three is dedicated to analyze some disadvantages of outside environment in China, which cause the unfavorable level of taxpayer compliance. The defects in the outside environment which is confined to including tax institution, tax administration, tax using system, and social climate of tax are discussed.The final section offers suggestions on how to optimize the outside environment and increase taxpayer compliance. It advocates that taxpayer compliance should be taken into account in the construction of tax environment. Ways to optimize the environment are suggested to be cultivating taxpayer consciousness, strengthening tax legal system, perfecting tax institution, carrying out people-oriented tax administration, establishing public tax using system, and building up sound social climate.Throughout this essay, the focus is on individual income taxpayer compliance. Therefore, compliance of other taxes is rarely addressed.