Risk Classification as an Incentive to Taxpayers’ Compliance

Abstract

Managing and improving tax compliance is a main challenge for tax administrations. They seek compliance through monitoring, auditing and punishing penalties. This paper proposes a model based on trustworthy, transparency and incentives. The proposal is a classification of tax liability risk of companies and incentives to consistent compliance behavior. These incentives include simplified monitoring and auditing procedures, and self-regularization options. It can improve companies’ reputation, credit access, transparency and align interest with the taxpayers. The theoretical foundations are tax segmentation and compliance models, interorganizational trust and local productive clusters. The article presents the main challenges and opportunities for further research.