Who doesn't lie? Do you think it's realistic to go your whole life without ever telling a lie? Of course not. And that whole George Washington story about him never telling a lie...is a lie! But there are many levels of lies, and sometimes lying is actually the better thing to do. "Does this dress make me look fat?" However, lying becomes a problem when:
A - The lie withholds need to know information. Such as a teen denying drug or alcohol use.
B - The lie is the result of self-delusion. Such as a child saying that they won the game when they know they lost.
However, the most common type of lie is the "tactical lie." Such as when your kid says it was the dog who drew on the wall in order to get out of trouble. In all cases, the "fix" is the same. Teach your kids to embrace reality instead of avoiding it.
"But Reality Bites!"
It most certainly does at times. But - Avoiding an inconvenient truth makes reality bite even more later on. Many adults even struggle with this. Self-delusion is common practice among most people to some degree. This is why it's essential to teach kids to value truth while they are in development.
"There is no way my kid is going to admit to something if they know a penalty will follow."
Sure, that makes total sense. But there are things that you can do to increase the chances.
Let them know that they are loved just the same no matter what they do or don't do.
Let them know that having honesty shows that they trust and love you too.
Let them know that honesty shows strength and bravery.
Delay the penalty. Praise them first for honesty, and then talk about the consequence.
Control your emotions. "I'm not telling Dad...Ya know how pissed he'll get!"
Lead by example. Admit when you are wrong, so they have a model of how to do it.
Give them the option to "Take the Fifth." This is a good compromise because it allows them to "admit it" without admitting it.
Summary
Tactical lies at least have some logical purpose to them even though they can result in harm. But these lies can make you feel like there is a wall between you and your child, that they don't trust you, or they think that your stupid enough to believe them. However, the self-delusion lie can have even broader consequences. The general practice of denying something just because it's unpleasant is natural human behavior that we all do to some degree. Teach your kids that a bad reality can only be made better by facing it, even though it may suck at first.