It's All About Packaging the Narrative (3/19/14)

Procedurally Taxing, the premier federal tax procedure blog, has a great guest blog posting by Susan Morse, a UT Professor.  Can the IRS Tell a Good Story? (Procedurally Taxing Blog 3/19/14), here.

The blog is based on Professor Morse's article on Narrative and Tax Compliance, on SSRN here.  The SSRN summary of the article is:

Some noncompliant taxpayers fall outside the reach of third-party withholding and reporting. Revenue agencies may use enforcement and/or prosocial strategies to encourage compliance among such taxpayers. Revenue agencies should stand ready to use narrative as part of these efforts, despite implementation challenges. This is because of the persuasive capacity of narrative. It is also because media will likely create a narrative around any prominent strategy, and the media narrative may not further the goals of the agency.

In arguing for the narrative approach to bolster tax administration and compliance, Professor Morse says in the blog:

A tax administrator might use a punishment narrative to persuade taxpayers that evasion will be discovered (even though the chance of audit is very low).  Stories about other taxpayers, similar to target taxpayers, who have gotten caught can help persuade the audience about the likelihood of audit.  The U.S. government did a nice job with this with respect to its criminal prosecution of holders of secret offshore accounts.  Its strategy was straightforward – it simply wrote press releases that gave some detail about the lives of the individuals who struck plea bargains, for example describing one taxpayer as a retired sales manager for Boeing. 

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Stories can be very short.  One famous six-word effort is sometimes attributed to Ernest Hemingway:  “For sale: baby shoes, never worn.”  The IRS offshore account press releases, barebones as they were, gave enough information to permit other taxpayers to fill in the blanks, and make a persuasive story out of the skeleton information.   It helps that the offshore account stories targeted a fairly specific kind of tax avoidance.  Leigh Osofsky, for example, has written about the promise of a strategy that tailors enforcement efforts for micro-groups of taxpayers.