The Intrinsic Flaw in Taxation Impeding Tax Compliance

Would you like to decide how your tax payments are used? Let us elaborate the question: would you like to decide how your tax payments are used without interfering with equity issues? Do you think it will induce you (and your neighbors) to pay taxes? This paper examines whether we should advocate a normative principle for allocating tax payments—beyond revenue raising—to enhance tax compliance. The paper endeavors to tackle tax evasion from a specific angle by understanding the intrinsic flaw in taxation—the unrequited payment factor. The paper presents the newly coined de jure benefit principle, somewhat in line with the Wicksellian approach, which helps both to preserve equity and enhance tax compliance. The new principle does not mean that people pay for the public goods they consume but rather that they choose how their tax dollars are spent, without directly interfering with state sovereignty. The paper proposes a mechanism for implementing the de jure benefit principle by linking the expenditure side to revenue raising to enhance tax compliance without affecting equity considerations or radically transforming the current system.