Take a bow, America.
When it comes to filing and paying your federal income taxes, you are as honest as the day is long. Most of us anyway.
And we’re certainly heads and shoulders above some other countries when it comes to voluntary compliance rates (VCR). According to an article in the current issue of Atlantic Monthly, the U.S. is among the world leaders in tax honesty, with a VCR that has “consistently hovered between 81 and 84 percent.”
The magazine noted that Germany, with the top European Union economy, had a VCR rate of 68 percent; Italy, where 1,000 citizens were charged with cheating the government out of 2.3 billion euros in tax revenue last year, had a VCR of 62 percent and a former prime minister who was charged with tax evasion once said that “evasion of high taxes is a God-given right.”
It noted that in Greece, which has been besieged by financial woes, more than half the households pay zero income tax and economists have struggled to compute its compliance rate.
“After the 2008 recession,” Atlantic Monthly said, “the government placed a luxury tax on private pools. When only 324 residents in the ritzy suburbs of Athens admitted having one, tax collectors knew they were being swindled — but didn’t know how badly until Google Earth photos revealed the real pool count: 16,974. It’s now common to conceal chlorinated assets with floating tiles, army nets, and pool interiors painted to mimic grass.”
What’s perhaps even more notable is that Americans’ tax honesty comes despite budget cuts to the IRS and an average audit rate that has gone down to just 0.6 percent. It comes, too, despite a long-term decline in confidence in government and a hyper-partisan Congress that often cannot reach agreement on conducting the nation’s business.
That’s not to say all is good in tax-collecting land. A report in the Journal of Accounting in 2017 noted that even with our high voluntary compliance rate — some 7.5 million Americans don’t file returns — and those are just the ones who get W-2s and other income statements, it doesn’t include the off-the-grid cash-only scofflaws. That costs the U.S. an estimated $458 billion in unpaid taxes, although the IRS usually recovers more than $50 billion of that. Combined with international non-compliance, which is estimated at $43 billion to $123 billion, it would have been enough to cover recent U.S. budget deficits.
So, yes. There is work to be done.
Still, as we approach the Monday, April 15 tax deadline, you can take solace in the fact that most Americans — like you — view supporting our government as a civic duty, the price of democracy and be buoyed by the sense that your neighbors — despite the grumbling — feel the same way.
Now get out the checkbook. No cheating. Tax Day is coming.