Rory Sutherland Rory Sutherland

It’s easy to sex up the business of paying tax

To fund the war against Napoleon in 1813, Princess Marianne of Prussia invented an ingenious tax-raising scheme. Wealthy Prussians were called on to hand their jewellery to the state; in exchange they were given iron replacements for the gold items they had donated.

Stamped on the iron replicas were the words ‘Gold gab ich für Eisen’. The phrase has a double meaning, the iron referring to the iron of the replica, but also to the ‘iron’ your donation had bought as armaments. At Prussian balls thereafter, iron jewellery carried more status than gold. Gold merely proved your family was rich; iron proved you were not only rich but patriotic.

Why does no one try such ideas today? As Adam Smith observed,  ‘The chief enjoyment of riches consists in the parade of riches’.

Just as the British Legion would raise far less money if it stopped handing out poppies, the DVLA seems to have lost millions when it stopped handing out tax discs. Perhaps, without the bizarrely enjoyable annual rite of unperforating and displaying your tax disc, people feel short-changed? To promote honesty and altruism, it helps to provide some small selfish gain in return.

For years I have advised public health professionals to stop recommending we engage in ‘ten minutes of aerobic exercise, three times a week’. Phrased like that, it sounds deeply boring. ‘Why don’t you encourage people to have more sex instead?’ I asked. After all, it’s aerobic, it lasts ten minutes (if you’re English) and, unlike jogging, ridiculous clothes are optional.

In the same way, why not make it more interesting to pay tax? Some people say we pay too much tax. Others say we pay too little. But the current tax system is flawed for another reason: it is psychologically tone-deaf.

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