How should taxes be spent? Imagine a world where you decide

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Everyone likes to think they have the best ideas for how taxpayers' money should be spent – but what if you actually did get to decide? 

Academics at Oxford University, Saïd Business School, Harvard Business School and the University of Pittsburgh are proposing Europe's tax authorities try precisely that.

They recommend that when individuals carry fill out their self-assessment tax returns online, they are shown an interactive pie chart that has been pre-set to show what their tax will be spent on. They are then able to alter the chart to set their own preferences regarding spend on healthcare, education or defence. 

These settings are then compiled into a report that could be put to policymakers – although there is no commitment to changing spending.

The group is in discussions with HMRC and its counterparts in Belgium and Norway about conducting trials and today will be speaking to authorities in Italy about adopting their idea. 

The researchers claim two previous experiments suggest that allowing tax-payers to express preferences about how their taxes are spent – even when they know that the preferences are non-binding – makes them more positive about paying their taxes, and could increase tax compliance by up to 15 per cent.
 
Participants in the experiments were also found to be less likely to take advantage of a "questionable tax loophole", the academics said. 
 
Jan‐Emmanuel De Neve, associated professor in economics and strategy at Oxford Saïd, said: "This is an almost zero-cost proposal that has the potential to increase the number of individuals declaring and paying all the tax they owe.The tax-gap for individuals in the UK is around £4.7bn, according to HMRC, so it could make a very positive contribution to increasing the amount of tax collected.
 
"Although raising transparency is surely worthwhile, we find that it is allowing for participation that can really change taxpayer behaviour."