The vast majority of the proposals on the table today are simply different implementation mechanisms of the same basic idea: a change in the tax base from income to consumption. The purpose of this article is to consider the implications some of these proposals have for the enforcement of tax compliance (prevention of cheating). For this reason, it will only briefly address the impetus for a consumption tax and the policy considerations behind it. The first part will also give short descriptions of the proposals that will be considered in this article: the National Retail Sales Tax, the Savings-Exempt Income Tax and the Value-Added Tax (VAT). Next, I will analyze each of these proposals with regard to the feasibility of evasion. Finally, the article concludes that with regard to the prevention of tax-cheating, the VAT is the most efficient of these proposals. In light of the fact that in most other respects they are effectively the same (they all tax the same base at what would become the same amount after determining revenue needs and effectively operate to encourage saving and boost the economy through investment), I would endorse a VAT (with progressive safeguards as briefly noted) in order to discourage cheating and to take the burden of compliance out of the hands of the average citizen.
Kalyani Robbins, Implications of the Tax Reform Proposals for Fraud – or – How to Shift to a Consumption Tax Without Helping the Cheaters, 83 Tax Notes 1371 (1999).