Personally, I wouldn't lie to the child to teach them not to lie, any more than I would hit them to teach them not to hit. It may vent your frustration, but I think it's a poor example to set and that there are more creative ways to alter a child's behavior.
I would have both children help you make behavior charts for them. I would choose a couple of specific behaviors, including the lying, to target for improvement. Each time they tell the truth when questioned (and/or share, use their manners, etc) they get a mark/sticker etc on their chart. Anytime they lie (hit, refuse to share etc) the get a disappointed mark/sticker and, depending on the offense, time-out.
I would set up the rewards daily at first and slowly extend them for a week's behavior. With my daughter, the first day's goal was to get more positive marks than negetive marks, even if this meant giving her credit for planned "good deeds" (such as dramatically choosing a toy to "share" with her brother). If she acheived the goal then, at the end of the day, she could pick a reward from the bag (a bunch of inexpensive toys from the dollar store that they loved). By the second or third day (depending on progress) the goal would be only positive marks for the day--any "sad faces" and there would be no reward at the end of the day. Soon we were up to special weekend treats for a week's worth of smiles on her chart and we'd stopped having to use timeouts almost altogether (where we had been using them several to many times a day). This is all just a suggestion about how we did our charts, but the structure of your plan is less important than being consistant implementing it.
The point of all this is to say that sometimes kids get more attention for misbehaving than they do for behaving. It's so easy when we're busy to only recognize *bad* behavior and to ignor all the good things. I quickly learned that when I only intervened to reprimand my kids without noticing when they played nicely they stopped caring if they got time-outs or lost priveleges. When I thought about it I understood this at some level, having worked for bosses who only commented on my work if I made a mistake yet never seemed to notice or care when I went the extra mile. Eventually, I stopped caring about going the extra mile since it was never recognized. So had my kids.
With kids, a chart is a good, concrete way to recognize good behavior. It forces you (the parent) to pay more attention when they do well, and it rewards the kids for their good effort. When they were having a good day I also made a point of telling someone (my mother, husband etc) what a good job the child was doing on their chart *within earshot of the kids* so that they had one more reason to be proud of their efforts.
At this point the mere suggestion that a certain behavior will earn a sad face on their chart is generally more than enough incentive to stop or avoid a behavior. And I've gotten into a habbit of noticing and verbally rewarding good behaviors, too, which makes everyone happier! It doesn't mean that they're perfect, but they're certainly much more motivated to please now. And FWIW, we haven't made a propper chart in months and have substituted occasional marks on the calendar. Rewards only return if there's a new specific behavior that we need to address. Mostly, it's helped us all to get into a healthier habit and phased itself out!
Good luck!
