Design Suggestions for Smart Tax Return Software Based on Reviewing Tax Compliance Literature

Abstract

Taxes are important for any modern society, but not all taxes are properly paid. Taxpaying application is a new type of tool in the interaction between tax authorities and taxpayers, which provides a new testbed to see how human-computer interaction design can enhance social welfare by promoting tax compliance behavior. In this paper, we reviewed relevant literature on psychological theories and factors that are relevant in tax compliance. It was found that prospect theory, mental accounting theory, the interaction between taxpayers and tax authorities, and social norm theory all provide useful insights to understand the tax paying process. In addition, we extracted six factors from the literature which are key to tax-paying behaviors, including, “the reference point of taxable income”, “the salience of a separate mental account for taxation”, “perceived easiness to pay tax”, “trust in tax authorities”, “perceived power of authorities”, and “perceived norms to comply”. Finally, we proposed a series of suggestions on how tax-paying applications can be designed to enhance tax compliance through these 6 factors. These suggestions were related to the content, function, structure, and procedure of the application.