Eliza Ahmed

1
When tax offices become collection agencies At
what cost?

• Eliza Ahmed
• Centre for Tax System Integrity
• Australian National University

2

• Do tax authorities leave themselves at risk of
  tax evasion when they become collection agencies
  for controversial government policies?

3

• 1. When tax collectors become collectors for
  child support and student loans Jeopardizing or
  protecting the revenue base? (Ahmed V.
  Braithwaite)
• 2. Tax evasion among graduates repaying student
  loans Balancing the books, sending a political
  message, or flouting the system? (V. Braithwaite
  Ahmed)
• 3. Can justice and shame deter an escalation in
  tax evasion? (Ahmed V. Braithwaite)

4
What does past research tell us?

• Financial self-interest (Allingham Sandmo,
  1972 Freiberg, 1990)
• Deterrence (Grasmick Bursik, 1990 Lewis, 1982)
• Moral obligation (Grasmick Bursik, 1990 McGraw
  Scholz, 1991 Schwartz Orleans, 1967)

5
What does past research tell us? (contd)

• Shame management (Ahmed, Harris, Braithwaite,
  Braithwaite, 2001)
• Fairness (Kinsey Grasmick, 1993 Scholz
  Lubell, 1998)
• Reactance (Kirchler, 1999)

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What does past research tell us? (contd)

• Trust (Scholz Lubell, 1998 Tyler, 1997, 2001)
• Trust norms (V. Braithwaite, 1998)

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STUDY 1Research questions

• 1. Are taxpayers making additional payments
  through the tax system less compliant?
• 2. To what extent does belief in trust norms act
  as a social constraint, and prevent tax evasion?

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METHOD

• Community Hopes, Fears and Actions Survey
  (Braithwaite, 2000)
• 7754 randomly sampled Australian citizens were
  mailed out the survey questionnaires
• 2040 respondents returned their completed
  questionnaires

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MEASURES

• Dependent variable Tax evasion
• Under-reporting income
• Engaging in the cash economy
• Exaggerating deductions

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Independent variables

• Additional payments
• Deterrence
• Shame management
• - shame acknowledgment
• - shame displacement
• - shame avoidance
• Trust norms

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• RESULTS

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• Table 1. Correlation coefficients between tax
  evasion and other variables

??? p lt .001 ?? p lt .01
13
Table 2. Standardized beta coefficients from
regression analysis predicting tax evasion
 ??? p lt .001 ?? p lt .01 ? p lt .05
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___ Additional payments ----- No payments

• Figure 1. The role of trust norms in moderating
  the relationship between making additional
  payments and tax evasion

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Summary from Study 1

• When policy changes, citizens may protest, but
  the relationship between citizens and the tax
  office acts as a protector, ensuring that
  non-compliance does not spin out of control.

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STUDY 2
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Personal injustice

• Figure 1. A conceptual model of justice, shame
  and tax evasion

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STUDY 2Research aims

• 1. To explore the extent to which additional
  payments, perceptions of justice, and shame
  management play important roles in predicting tax
  non-compliance
• 2. To evaluate the theoretical relationships
  among all variables sketched in Figure 1

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METHOD

• Graduates Hopes, Visions and Actions Survey
  (Ahmed, 2000)
• 1500 stratified sampled Australian graduates were
  mailed out the survey questionnaires
• 447 respondents returned their completed
  questionnaires

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MEASURES

• Tax non-compliance variables
• Dissociation (desire to game play or disengage)
• Tax evasion (behaviors of not lodging,
  under-declaring income, or over-claiming
  deductions)

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Independent variables

• Additional payments
• Perceived injustice
• - societal (unfair social policy)
• - personal (unfair exchange)
• Shame management
• - shame acknowledgment
• - shame displacement
• - shame avoidance

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RESULTS
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• Table 3. Results from the logistic regression
  analysis in predicting tax evasion

 ??? p lt .001 ?? p lt .01 ? p lt .05
24
.12

• Figure 2. Results of a path analysis showing the
  relationships among all variables considered in
  Study 2

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Table 4. The overall fit indices for the model
derived from the path analysis
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• ... The one thing that I did find annoying was
  paying HECS for one or two units where the tutors
  were hopeless and basically didnt teach us much
  at all. I realize it is more the responsibility
  of the universities to ensure that their tutors
  are competent, but it is in cases like these that
  people resent having to pay HECS, ie. when they
  didnt learn anything new!

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• The government should realize that investing in
  tertiary education is investing in the countrys
  future. By raising fees, introducing up-front
  fees, ..., they are encouraging people not to
  study and not to help educate the country.
  Education should be free, after all people in the
  army get paid to be educated!

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• I think that HECS should only be repaid if the
  education received has been of value in gaining
  employment

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Where to from here?

• Responsive regulation is distinguished (from
  other strategies ...) both in what triggers a
  regulatory response and what the regulatory
  response will be. ... Government should be
  attuned to the differing motivations of regulated
  actors. Efficacious regulation should speak to
  the diverse objectives of regulated firms,
  industry associations, and individuals within
  them (Ayres J. Braithwaite, 1992)