Week 6 Discussion – JAMES ONYANGO

I’m trying to study for my Writing course and I need some help to understand this question.

Respond by Day 5 to two colleagues in the following way:

  • Explain what other incentives you might think of to make the nudge more effective and why you might use them.
  • $5 Post


Scenario 2: Nudging

1.Overview:

Regulations aim to modify how individuals or entities respond to situations. Meleyal (2017) described regulations as the legal framework imposed by the government and the rules that prescribe professional conduct. The author noted that regulations create duties upon entities and give them responsibilities (p. 934). Similarly, nudging, as an experimental process, enable policymakers to test possible outcomes of policy provisions. The nudge theory draws primarily on behavioral economics to explain why people behave the way they do and suggests ways that the environment of choice can be structured to lead people to make different choices (Meleyal, 2017; Macaulay, 2018). As such, nudges are methods to achieve rule adherence through a process of influencing decision making. Besides, the Nudge theorists suggest that, in order to influence others, one must present options that make it easy for those we seek to influence to conform. Anticipated actions or outcomes must promise or demonstrate a positive outcome in the event of adherence.

Taxation

The attitude of taxpayers towards taxation impacts compliance. For instance, Vehovar, Kavkler, & Huptman (2018) noted that fairness should be critical in understanding tax evasion or compliance. The authors further pointed out that the perception of justice as a factor influencing taxpayers’ behaviors is essential. Taxation is a significant source of revenue for governments to finance the production of public goods. Consequently, countries seek ways of encouraging taxpayers to honor their obligation to remit their taxes. Through nudging, public officials can test policy options that encourage different segments of taxpayers to file their taxes. For instance, self-employed taxpayers, among other considerations, seek to understand the benefits of tax compliance, the complexity of tax remittance processes, and the negative impact of non-compliance on their businesses in determining whether to comply or default.

Policymakers can introduce incentivized processes to facilitate compliance. For the self-employed taxpayers, a complex, tedious tax remittances process impedes compliance. Additionally, by introducing tax structures proportionate to the cost of improving processes of doing business would be ways policymakers can employ the nudging approach to evaluate possible outcomes. For example, by automating tax returns to facilitate the process, self-employed taxpayers are enabled to comply, especially when returns can take place in the comfort of their homes or business premises. Such a system encourages compliance as it takes away the added layer or hidden cost of having to go to a government office and wait in long queues to file returns. Through a deeper understanding of behavioral constructs, policymakers can design policies that respond to society’s social and moral norms to address critical problems (Mills, 2013, p. 29).

Muriithi & Moyi (2003) noted that the Kenyan tax regime went under significant reforms from 1986. The tax reform sought to improve efficiency, productivity, collection, administration, and lower rates while gaining effectiveness through elasticity (p.6). One of the reforms included restriction of exemption, including the reduction in the range of exempt goods to attract additional revenue. The administrative capacity had to be strengthened, including a rapid release system, computerizing selected functions, strengthening cargo control, among others (p. 7). The above example, among other areas of tax reform in Kenya, presented various elements where a nudge can assist in accomplishing or determining the extent to which a policy option led to the desired outcomes or not.

Additionally, restrictions such as the list of items exempted either compel the taxpayer to forgo the item or to pay for the benefits altogether. A combination of the nudge style mechanisms and coercive approaches optimizes the outcomes. Nonetheless, a public administrator must establish what elements best respond to either of the mechanisms when assessing public policy areas such as taxation.

Reference

Macaulay, M. (2018). Public Policy: And the “Nudge.” Public Sector, 41(3), 19–20.

Meleyal, L. (2017). Nudging social workers towards interpretive vigilance: approaches supporting management of conduct in the workplace. European Journal of Social Work, 20(6), 935–946. https://doi.org/10.1080/13691457.2017.1320526

Mills, C. (2013). Why Nudges Matter: A Reply to Goodwin. Politics, 33(1), 28–36. https://doi.org/10.1111/j.1467-9256.2012.01450.x

Muriithi, M. K., & Moyi, E. D. (2003, May 1). Tax Reforms and Revenue Mobilization in Kenya. Retrieved July 3, 2019, from Africa Portal website: https://www.africaportal.org/publications/tax-refo…

Vehovar, A., Kavkler, A., & Huptman, L. (2018). The Impact of Individualism and Uncertainty Avoidance on Interdependence of Tax Culture and Tax Evasion. Lex Localis – Journal of Local Self-Government, 16(4), 821–840. https://doi.org/10.4335/16.4.821-840(2018)

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