Nudge – the importance of a badge – obvious in retrospect

by Simon Murdoch

Great story in the Telegraph today: Fears of evasion after the end of the tax disc sees revenue fall by millions.

To save money the UK government in their wisdom got rid of the car tax disc in order to save £7m a year. In other words, to tax your vehicle you now do it online and DVLA and the police know whether your vehicle is paid up to date or not.

A year later DVLA have reported that their revenue from vehicle excise duty has fallen by £93m!

The Telegraph article suggests that tax evasion has gone up. Certainly the detailed figures imply that at least £45m of the fall in revenue is due to increased tax evasion.

Seems a no brainer to me. It’s all about psychology – the sort of psychology I’ve enjoyed reading about in Nudge, Freakonomics and Superfreakonomics.

nudge book cover

When there was a tax disc on the windscreen of your car, you weren’t just showing the police whether or not your car has up to date tax, you are telling every passer-by. Your neighbour can see whether you are a law abiding citizen or not. The fear of being seen to be a fraud by our friends and neighbours helps keep more people on the straight and narrow of paying for their tax disc on time.

Hopefully the DVLA and/or the government will see sense and bring the tax disc back asap.

And perhaps they should also introduce a badge to prove that you have paid your car insurance as well 🙂

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