1.0 Introduction

Emotions are not incidental to tax policy, they are integral. From anxiety at the thought of an audit to the quiet pride of meeting obligations, taxpayers’ emotional states affect how they interpret messages, make decisions and respond to enforcement. The MINDSPACE framework,¹ developed to guide behaviourally informed policymaking, includes ‘Affect’² as one of its central features, yet this component remains underutilised in tax scholarship and administration.

This post draws on my PhD research comparing tax compliance behaviour in Australia and Pakistan to explore how the affect heuristic plays out in practice. I argue that understanding taxpayer emotions, particularly shame, guilt, pride, and fear, can help tax authorities design fairer, more effective compliance strategies. Naming and shaming, for instance, may appeal to certain affective instincts, but its effectiveness is culturally contingent. That is, it depends on whether public exposure aligns with the society’s norms and expectations. Such mechanisms can work in societies where public transparency is normalised, but they can backfire when used in settings that do not share those norms. In light of this, I propose an ‘empathy-based’ model that includes second-chance mechanisms and emotionally resonant communication to foster sustained compliance.

1.2 Affect and Tax: The Theory

The MINDSPACE report defines affect as the influence of emotional states, ‘hot’ or ‘cold’, on decision-making.³ Positive moods may lead to optimistic choices, which in the tax context can include risk-taking behaviour such as assuming one will not be audited or attempting to conceal income. Negative moods, on the other hand, tend to produce more cautious or pessimistic behaviour. For example, being overly conservative in claiming deductions or double-checking every entry to avoid mistakes. Policymakers are encouraged to recognise these dynamics and account for them when shaping interventions. For example, a mandatory ‘cooling off’ period before making financial decisions might prevent people from acting impulsively in a heightened emotional state.⁴

In taxation, the emotional experience of interacting with authorities, whether it is fear of punishment, shame from public exposure, or anger at perceived unfairness, or simply how one is made to feel during encounters with frontline staff, can drive compliance as much as legal or financial incentives.⁵ Recent empirical research into HMRC’s Charter found that when democratic tax principles, such as ‘getting things right’, ‘making things easy’, ‘being responsive’ and ‘treating people fairly’, are not upheld in practice, taxpayers can feel disempowered, mistrustful and emotionally distressed.⁶ Tax is not just about what people owe, it’s about what they feel.

1.3 Emotions at the Forefront: Shame, Guilt and Compliance

Building on psychological research, my study found that integral emotions (those arising directly from the tax context) play a pivotal role in compliance decisions. Taxpayers may feel shame when imagining being publicly named, or guilt when contemplating dishonest declarations, even if they are unlikely to be caught. These affective responses can be as powerful as the threat of penalties.

As Erard and Feinstein’s model of moral sentiments suggests, shame is externally driven, based on the anticipation of others’ judgment.⁷ Guilt, however, is internal, a reflection of self-assessment against social norms. Both influence behaviour, but in different ways. While shame may prompt short-term compliance to avoid humiliation, guilt fosters internalised accountability and longer-term honesty.

2.0 Data Snapshot: Insights from the Study

2.1 Methodology

This study drew on data collected over a 15‑month period from 193 participants in total. Of these, 157 self‑employed taxpayers completed a structured survey (79 in Australia and 78 in Pakistan), and 36 took part in interviews (18 in each country). The research design captured both attitudinal and behavioural responses to a range of compliance measures, providing a rich mixed‑methods perspective.

2.2 Naming and Shaming as a Compliance Tool

QUESTION PAIR	CORRELATION AU             PK
SQ12. If i am ever named‑and‑shamed for tax non‑compliance, i will feel guilty and remorse, and possibly alter my behaviour to avoid humiliation in the future SQ11. Naming and shaming techniques (i.e. Making the identity of non‑compliers public by publishing their names and details in the newspapers or online etc.) Are unfair and should not be used by the tax authorities	-0.043	-0.199

Table1. SQ12 and SQ11 correlation results.

Australia. The correlation between feelings of guilt and remorse if named‑and‑shamed for tax non‑compliance (SQ12) and the belief that naming and shaming techniques are unfair (SQ11) was –0.043 (p > 0.10). This is a very weak negative correlation and not statistically significant. It suggests there is almost no relationship between a taxpayer’s perception of the fairness of naming and shaming and their emotional response of guilt or their likelihood of changing behaviour to avoid future humiliation. In other words, whether individuals view naming and shaming as unfair does not appear to significantly influence their feelings of guilt or their behavioural intentions in the Australian context.

Pakistan. The correlation between SQ11 and SQ12 was –0.199 (p < 0.05), indicating a weak but statistically significant negative association. This suggests that individuals who believe naming and shaming is unfair are slightly less likely to feel guilt and remorse or to alter their behaviour if they are named‑and‑shamed for tax non‑compliance. In the Pakistani context, those who see naming and shaming as unjust may be less affected emotionally or behaviourally by such tactics, which could reduce the intended deterrent effect.

These findings illustrate how the affect component of MINDSPACE shapes the effectiveness of naming and shaming strategies. In Australia, the almost non-existent correlation suggests that feelings of guilt or remorse are not strongly linked to perceptions of fairness, indicating that naming and shaming does little to activate an emotional lever for compliance. Other variables in the dataset, however, demonstrated stronger and more meaningful associations with affect. In particular, feelings of guilt were more clearly linked to perceptions of civic responsibility, sensitivity to social pressure and the belief that paying tax contributes to the public good. While emotional responses appeared more muted and context-specific in Australia, often mediated by professional advice and rational judgment, they played a more prominent role in Pakistan, where communal norms, trust in authority and fear of social disapproval more visibly shaped taxpayer behaviour.

Moreover, the statistically significant negative correlation in Pakistan suggests that individuals who view naming and shaming as unfair are less likely to report feelings of guilt or to change their behaviour in response, which may, reduce the intended deterrent effect. Together, these results suggest that emotional responses to compliance interventions may vary across contexts, and that policy tools relying on affect should be carefully tailored to cultural expectations and taxpayer perceptions to be effective.

2.3 Emotional Divergences: Australia vs. Pakistan

The role of affect also varied significantly across jurisdictions. In Australia, participants tended to describe their tax behaviour in analytical terms, often emphasising reliance on professional advice, careful reading of guidance material and deliberate calculations to ensure compliance. Emotional triggers such as shame or pride were still present, but they surfaced more subtly, for example as a private sense of satisfaction after lodging accurately or mild embarrassment when seeking help, rather than strong outward reactions. In Pakistan, by contrast, emotional and social norms held stronger sway. Participants reported a greater fear of social judgment and more acute sensitivity to community perceptions. Here, the threat of naming and shaming could be a stronger deterrent, but only if seen as legitimate and fairly applied. Where trust in the system was low, even strong emotional triggers failed to influence behaviour.

2.4 Emotionally Resonant Communication

Tax communication itself is an emotional experience. Clear, accessible messaging reduces confusion and anxiety. Overly complex instructions, on the other hand, provoke frustration, anger and disengagement. This is especially relevant for the self-employed, many of whom face stress navigating uncertain reporting obligations. An interesting nuance, however, is that not all complexity is imposed by the system itself. Some of it can be self‑generated, for instance through attempts at tax minimisation or other opportunistic behaviours, which add further layers of calculation and uncertainty to the process and can intensify emotional responses.

My survey findings support this point. In Australia, only a modest proportion of respondents strongly agreed that emotions such as fear or anger influence their tax decisions (10.1 per cent), with a larger group somewhat agreeing (24.1 per cent) and a similar share taking a neutral position. In Pakistan, by contrast, emotions were a more prominent factor, with 15.4 per cent strongly agreeing and 37.2 per cent somewhat agreeing that their emotional state affects compliance decisions. These differences suggest that emotionally charged messaging is likely to resonate more strongly in Pakistan, whereas in Australia, communication strategies that prioritise clarity and factual detail may be more effective than those relying on emotional appeal.

Drawing from my findings, I argue that emotionally attuned communication, particularly when delivered by a trusted messengers, such as the tax authority itself or a recognised intermediary like an accredited tax adviser, can significantly enhance compliance. When the source of the message is seen as credible and fair, campaigns that acknowledge taxpayers’ emotional burdens, rather than merely instructing or penalising them, are more likely to foster stronger relational trust.

3.0 Beyond Shaming: Designing for Positive Emotions

Overreliance on shame and fear may backfire. While such tactics can work under certain cultural conditions, they risk alienating taxpayers or undermining long-term voluntary compliance. Instead, tax authorities should consider strategies that evoke positive affective states. For instance, publicly recognising individuals for consistent compliance, particularly among small business owners, can foster a sense of pride and legitimacy. Storytelling that highlights how tax contributions support essential community services can also strengthen a sense of civic purpose.⁸ Even something as simple as a personalised message of thanks after filing a return can reinforce the value of honest participation. These emotional nudges work not through punishment, but by affirming identity and reinforcing a sense of belonging.

4.0 Policy Proposal: A Second-Chance Model

One concrete recommendation informed by both empirical findings and global best practices is the adoption of a ‘second chance’ program, particularly for first-time or minor non-compliance. Rather than resorting to immediate public shaming, these programs provide taxpayers with an opportunity to correct their mistakes confidentially, supported by empathetic communication and access to guidance. Such approaches reduce the emotional harm often associated with compliance enforcement and align with the affect principle of MINDSPACE by promoting fairness, trust and a more supportive administrative environment.

This is not a novel idea, but a policy direction backed by successful models abroad. In the United States, the IRS’s Fresh Start initiative offers taxpayers various pathways to settle tax debt, access penalty relief, and avoid liens, ultimately making it easier to re-enter compliance voluntarily.⁹ Similarly, HMRC in the UK allows taxpayers to make voluntary disclosures of unpaid tax in exchange for more favourable terms and reduced penalties.¹⁰ These second-chance mechanisms demonstrate that fostering cooperation, rather than relying solely on deterrence, can enhance long-term compliance and institutional legitimacy.

Participants in my study, highlighted the need to distinguish between wilful tax evasion and unintentional error. I acknowledge that, particularly in a small business context, this boundary can be difficult to draw and open to manipulation. Nevertheless, a second-chance model creates space for empathetic engagement, giving taxpayers the chance to rectify their affairs without public humiliation or loss of dignity. In both the Australian and Pakistani contexts, such programs could significantly mitigate the emotional burden of compliance while cultivating a relationship of mutual respect and understanding between tax authorities and citizens.

5.0 Conclusion: Designing for Emotion, Not Just Economics

Affect is not an add-on to tax policy; it is a core component. If we fail to design for emotions, we risk creating compliance strategies that are either too harsh, too disengaged or too impersonal. The findings from my research show that emotions like shame, guilt, pride and anger are not noise, they are data. They tell us how taxpayers interpret messages, how they relate to institutions, and how they decide to comply.

MINDSPACE offers a valuable lens to rethink these relationships. By recognising the emotional lives of taxpayers, we can build systems that are not only more effective, but more human.

Author’s Note

This blog draws on my doctoral research, which explored tax compliance behaviour through the lens of the nine features of the MINDSPACE framework (messenger, incentives, norms, defaults, salience, priming, affect, commitment and ego) to examine three psychosocial factors: tax communication, tax literacy and naming and shaming.

For readers interested in the broader project, you can view the abstract of my PhD here. Thank you for your interest!