en News Single View - WHU – Otto Beisheim School of Management
Wednesday, 31. October 2012

How to increase the tax yield by keeping people from lying

Studies conducted by the Israeli-American behavioral economist Dan Ariely (Duke University, North Carolina) have put forth new insights into liar’s minds: Even liars have a fundamental sense of honor, and only a few tricks can prompt them to behave truthfully. 

While he was working together with a car insurance company, Ariely found out that clients, when filling out forms to indicate the recently covered distance of their vehicles, would rather make right indications if they were asked to honestly respond to the questions right at the beginning. The behavioral economist commented on this phenomenon by saying that appealing to one’s honor enhances the substance. According to Ariely, this finding could also be of high importance for other areas. For instance, fiscal institutions might increase the credibility of their clients’ information by little alterations on their forms and documents. If Ariely is right in his assumptions, this could be a new way to curb tax evasion.

Further studies revealed that individuals’ behavior shows only little dishonesty even if they are guaranteed no punishment for betraying. “We betray just as much as we can reconcile with our self-perception as somewhat truthful beings”, says Ariely. Interestingly, subjects were observed to be more willing to betray if others within the group did the same. The Professor justifies this with “social contagion”. In fact, deceivers even refer to this phenomenon to justify their behavior. So did Bernard Madoff, who evaded billions of dollars of tax payments, when saying “everybody was greedy”.

You can find the whole article “What makes us liars” on: www.spiegel.de/wirtschaft/soziales/dan-ariely-wie-man-menschen-das-luegen-austreibt-a-860787.html