Tuesday, May 29, 2012

Why We Cheat and Lie -- Taxes Included (5/29/12)

In an excellent article adapted from an upcoming book, Dan Ariely,  James B. Duke Professor of Behavior Economics at Duke University, offers insight from his research about why people lie.  Dan Ariely, Why We Lie (WSJ 5/26/12), here.  The name of the book is The Honest Truth About Dishonesty: How We Lie to Everyone---Especially Ourselves (Harper June 5, 2012), here.  Dan Ariely's Duke bio is here.

Here are some quotes easily applied to taxes that might entice readers to read the article and then, when published, the book.
What we have found, in a nutshell: Everybody has the capacity to be dishonest, and almost everybody cheats—just by a little. Except for a few outliers at the top and bottom [the top and bottom are those small percentages who will not cheat at all and those at the other extreme who will cheat big], the behavior of almost everyone is driven by two opposing motivations. On the one hand, we want to benefit from cheating and get as much money and glory as possible; on the other hand, we want to view ourselves as honest, honorable people. Sadly, it is this kind of small-scale mass cheating, not the high-profile cases, that is most corrosive to society. 
* * * * 
"[T]he level of cheating was unaffected by the probability of getting caught." 
* * * * 
The results of these experiments should leave you wondering about the ways that we currently try to keep people honest. Does the prospect of heavy fines or increased enforcement really make someone less likely to cheat on their taxes, to fill out a fraudulent insurance claim, to recommend a bum investment or to steal from his or her company? It may have a small effect on our behavior, but it is probably going to be of little consequence when it comes up against the brute psychological force of "I'm only fudging a little" or "Everyone does it" or "It's for a greater good." 
* * * * 
Another set of our experiments, conducted with mock tax forms, convinced us that it would be better to have people put their signature at the top of the forms (before they filled in false information) rather than at the bottom (after the lying was done)
* * * * 
In short, very few people steal to a maximal degree, but many good people cheat just a little here and there. We fib to round up our billable hours, claim higher losses on our insurance claims, recommend unnecessary treatments and so on.
Addendum on 6/5/12:

NPR Staff, The 'Truth' About Why We Lie, Cheat And Steal (NPR 6/4/12), article and audio, here.

On how only a few people cheat a lot, but a lot of people cheat a little 
"Across all of our experiments, we've tested maybe 30,000 people, and we had a dozen or so bad apples and they stole about $150 from us. And we had about 18,000 little rotten apples, each of them just stole a couple of dollars, but together it was $36,000. And if you think about it, I think it's actually a good reflection of what happens in society."
Addendum on 6/8/12:

Why We Cheat Just Enough to Feel Good (WSJ 6/7/01), videocast of interview of Dan Ariely, here.   The IRS discussion begins around minute 6.


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  2. Hi ij,
    good to see you backon board. Where does your case stand now?
    have you got it to a closure?

  3. BaloogawhaleheadMay 30, 2012 at 12:40 PM

    I can not believe you are not done yet. Are you any closer to final resolution in the great shakedown?


  4. my dear friend Anon123 and the other anon,

      I am not done yet.  My agent told me they were reviewing OVDI policy on RRSP.  I told them that I would be ready to opt-out -- but we are now stuck with this issue.

    IRS vs. IJ  <===> robbery vs theft  -- what a joke !

  5.  How long does it take them to make such a decision ? They should be happy with what you're giving them (still a lot) and let your RRSP be.

    The best case I can come up with is that they are worried that if they exempt RRSP they might have to exempt all foreign retirement accounts. Or that there might be a whale with a large RRSP (I don't even know if that's possible).

  6. Anon,
      Some might have already paid RRSP penalty -- as I would have done so if it were a few months ago when I was so afraid of not being able to "enjoy" OVDI penalty benefit (such as certainty).    --- Remember we all heard OVDI 2011 was the last chance -:).  

      IRS has not been consistent on RRSP.  At the very beginning, my agent told me that the would not impose penalty on RRSP.  But later, an order from high level in Washington DC (must be Obama's inner circle), that they wanted to impose penalty on RRSP.   Now, it becomes a hot potato when IRS could face a lot folks like me choose to opt-out.  I don't think I would even pay the penalty that I have agreed inside OVDI once I am out of the program.   

  7. If I understand well, RRSPs are not taxed until you withdraw from them, and therefore should not be included in the penalty computation. It should be a no brainer.
    I think that the issue is more about how much money they might have to give back to all the Canadians who entered the program and paid up penalties that were computed with RRSPs. It would be interesting to see that data. My guess is that if they decide to not include it, it will not be made public. We'll only know it when people are going to mention it on sites like this one.

    Why are they not answering the questions they've been asked about the ratio minnow to whale, and back taxes due vs penalties?
    The data might be embarrassing...

  8. BaloogawhaleheadMay 30, 2012 at 8:00 PM

    I am so sorry to hear the drama goes on for you ij. I hope you are personally doing well. I have a new outlook on this matter as I think it is futile to expect reason and justice to prevail. They have dug themselves into a corner with the numerous shakedowns that have already been closed.  For the sake of ones well being, one should deal with the problem the best way they can given their circumstances and then not look back. Be it noisy disclosure, quiet disclosure or go forward compliance or even doing nothing, let go of it once you have pulled the trigger. This will preserve ones sanity and also their health and well being. I have decided to do so, so this will be my last post. I had great news at a doctors visit today. My kidney function has improved so I hope it will continue to do so. I just want to thank the great souls that reached out to help so many in distress. The unsung heroes of this episode like you ij and of course Sir Jack Townsend who is a Knight in Shining Armor in my book any day of the year. Also the awesome warriors like Just Me, Moby, Anon5% and all the others. God Bless you all. I will peek at the blog once in a while but its time for me to let go.


  9. Jack,
    Thanks for bringing this subject up. I had seen the article at the WSJ, and was going to read it, but as it happens, other demands caused me to forget about it, but now I can go back and read it.

    I don't know if you or anyone reading here, ever listens to the podcast Radio lab, but a couple years ago, they did a good one on this very subject, and with some interesting observations and research. 

    Here is the link, and I would recommend it... actually I recommend most of their podcasts, as they are a favorites of mine...

    Is it possible to live a life without deception? 

  10. Thank you, my dear friend Anon123.  Glad to hear your news on your health and stay healthy.   Sad to see you leave, and I appreciated your kind support.
    In case, you come to DC area, please do contact me.  I would love to have a drink with you.  You can always reach me via Just Me

  11. @Anon123

    Happy trails. Good to hear you're letting go,  moving on, and doing so with improved health.

    I should do the same; I've tried to let the issue go but just can't stay away. I've got a couple of pet "FBAR/FATCA-undermining projects" that I'm slowly working on that I would like to see come to fruition first.

    Thanks for being with us with in the fight; stay well!


  12. Dear Anon123,

    Great news about your health.  I hope the improvements continue.

    You will be sorely missed.  I thank you so much for your posts.  As I am one of the early OVDI victims, having become FBAR aware during the period in between programs and having followed the counsel that was available at the time, your posts were the first to make me aware that something was rotten in Denmark.

  13.  Dear Anon 123 (2nd try),

    Great that your health is improved.  I hope that the improvements will continue. 

    You will be sorely missed.  Thank you very much for your posts.  As I am an early OVDI victim who became FBAR aware during the period between the first and second programs and followed the only available counsel at the time, it was your posts about your situation that made me aware that "something was rotten in Denmark" when it came to the administration of the OVD programs.  For me, yours were the first regular posts that made it clear how the programs were being run and made me realize that I was not alone in my concerns.

    I cannot thank you enough.  You, along with Just Me, Jack, Phil H., ij and Moby, have changed how I view my situation and the course of action I have ultimately ended up taking.  This course of action involved firing my lawyers as I realized that their approach only increased my stress and costs. I consider my current path to be for the best, but time will tell.   I have been relatively quiet because there is nothing to report and I think I will be most helpful to others if I can report facts.

    Due to my decreased stress level, I have been able to decouple myself somewhat from OVDI obsession and been able to focus on living my life, although only to a certain degree.

    I think it is extremely healthy that you are moving on and will be checking in only occasionally.  I wish you all the best with this and look forward to the day when I, too, can do so.  However, I am not optimistic that this will be soon.  Tomorrow, I will complete 18 months since I entered the VD system - 548 days -  and the end is nowhere in sight.  You helped me to understood that I had signed up for an exorbitantly expensive, multi-year roller coaster ride when I followed the recommended procedures.  You presented the unfortunate reality and I am grateful to you for giving me that understanding so I am prepared for what has come and what may come.

    Good luck to you and perhaps, one of the next times you check in I will have some news.

    Thanks again for being brave and being one of the first to use social media to educate other minnows.


  14. Anon123...  

    All the best Mate.  I hope you get this message and I didn't miss you. I should have checked back sooner.

    I understand you needing to get off this train and move on to preserve your sanity, let go.  That's understandable and ok.  

    In the meantime, this has had an opposite effect on me, and given me a mission of sorts. I still have the LCUs, so I am doing my little bit to try to derail the FATCA Freight train by information sharing. (See Shulman what you unleashed?  LOL Never under estimate the actions of a PO'd Customer.) 

    If you ever back slide and want to take a peek, here is the latest efforts to talk about what happened at the FATCA Public hearings (if the press doesn't report, is it really public?) on May 15th.  http://bit.ly/M7FdnP

    Cheers and best wishes

  15. More on the "we all lie" subject. 

    The author was interviewed last night on NPR's All Things Considered.
    Here is a link to the story, if you are interested.


  16. Just a little addition to the subject...

    The Most Surprising Thing About Wall Street Criminals


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