erich kirchler university of vienna, austria tarc master class london - 2014
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Tax Psychology (2) Social representations and communication. Erich Kirchler University of Vienna, Austria TARC Master Class London - 2014. Economic understanding of adults. Lay theories of economic relations (in contrast to expert knowledge of, for example, economists): - PowerPoint PPT PresentationTRANSCRIPT
Erich KirchlerUniversity of Vienna, Austria
TARC Master ClassLondon - 2014
Tax Psychology (2)Social representations and
communication
22
Economic understanding of adults
Lay theories of economic relations (in contrast to expert knowledge of, for example, economists):• Are developed on the basis of daily experiences• Schematically simplified; stereotypes• Provide explanations and orientations for
behaviour
3
1. Knowledge about taxes
4
Complexity of tax law
Tax law is not always clear…
Slemrod et al. (2001, p. 459): “… although one can assert that legality is the dividing line between evasion and avoidance, in practice the line is blurry; sometimes the law itself is unclear, sometimes it is clear but not known to the taxpayer, sometimes the law is clear but the administration effectively ignores a particular transaction or activity.”
Tax law is not always clear…
Owens & Hamilton (2004) collected experiences and innovations in taxation in various countries. They state that in OECD countries, one of the major problems in tax administration is what tax administration has to administer, the tax laws and how to interpret them (complexity, ambiguity, incomprehensibility of the law). Tax laws have become so intricate that even experts, such as accountants, attorneys, and tax officers have difficulty interpreting many of the law’s provisions.
Owens & Hamilton (2004) report that the number of words in the IRS Code (Income tax law, and entire tax code) increased steadily from 1955 to 2000.
61955 1965 1975 1985 1995 2000
0
200
400
600
800
1000
1200
1400
1600
1800
Income taxes only
Entire tax code
Thousands of words
Growth in number of words in the IRS Code from 1955 to 2000; adopted from www. taxfoundation/org/compliancetestimony.html; quoted in Owens and Hamilton (2004)
7
Tax law is not always clear…
Moser (1994) undertook a linguistic analysis of tax laws and claims several bad habits which make it difficult for ordinary taxpayers to understand the law.
Lewis (1982) reports that the necessary education to understand the law is between 12 and 17 years in USA, UK, and Australia, respectively.
Readability is the ease with which text can be read and understood. Various factors to measure readability have been used, such as "speed of perception," "perceptibility at a distance," "perceptibility in peripheral vision," "visibility," "the reflex blink technique," "rate of work" (e.g., speed of reading), “eye movements” and fatigue in reading.“The Flesch formulas: Flesch-Kincaid readability test
8
Tax laws are not always clear…
Efforts to simplify the law are undertaken in almost all countries.
“I hold in my hand 1,379 pages of tax simplification.” U.S. congressman Delbert L. Latta
9
Subjective knowledge
Tax law is complex. Sakurai & Braithwaite (2003) found in an survey with more than 2,000 Australian taxpayers that a relatively small percentage of respondents described themselves as fully competent: 36% denied fully the question, “I feel competent to do my own income tax return.”, 26% indicated to feel a little competent, 25% a fair bit, 12% very much.
It is not surprising that more than three thirds rely on tax agents, 6.5% on tax office staff, and 20% on other people.According to Blumenthal & Christian (2004) close to 60% of the 128 million individual income tax returns in the USA filed for tax in 2001 were signed by a preparer.
10
Poor understanding of tax law, taxation and tax rates breed distrust.
Low tax knowledge is correlated with low compliance.
Using education as a proxy for tax knowledge, it was found that higher education correlates with compliance (Kinsey & Grasmick, 1993; Song & Yarbrough, 1978; Spicer & Lundstedt, 1976; Vogel, 1974). Schmölders (1960) reports in his influential study on tax morale in Germany that agreement with governmental activities and fiscal policy was higher in higher educated groups.
Several survey studies found a positive relationship between (subjective or objective) tax knowledge and attitudes towards taxes and fairness assessments (Cuccia & Carnes, 2001; Kirchler & Maciejovsky, 2001; Niemirowski et al., 2002; Park & Hyun, 2003)Kirchler, Maciejovsky & Schneider (2003) assessed tax knowledge of fiscal officers, students of economics and business administration, business lawyers, and entrepreneurs, using a multiple choice test consisting of ten items, and correlated their knowledge with fairness judgments of tax avoidance, tax evasion and tax flight. Tax knowledge was neither correlated with the perceived fairness of tax evasion nor with the perceived fairness of tax avoidance. However, for business lawyers and entrepreneurs it was found that profound tax knowledge is positively correlated with perceived fairness of tax avoidance, indicating that the better the knowledge the fairer was tax avoidance perceived.
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2. Representations of taxes
12
Representations of taxes
Fynantzer = Landbetrieger, der die Leute umbs Geld bescheisset
Basilius Faber, 1680Thesaurus editionis scholasticae
Tax inspector = Impostor who screws people for their money
Representations of taxes
Peter Sloterdijk (2010)
“The modern democratic state gradually
transformed into the debtor state...
This metamorphosis has resulted,… , from
a prodigious enlargement of the tax base –
most notably, with the introduction of the
progressive income tax…
… each year, modern states claim half of
the economic proceeds of their productive
classes and pass them on to tax collectors,
and yet these productive classes do not
attempt to remedy their situation with the
most obvious reaction: an antitax civil rebellion.”
Attitudes and tax morale
Schmölders (1960):Tax morale is the “attitude of a group or the whole population of taxpayers regarding the question of accomplishment or neglect of their tax duties; it is anchored in citizens’ tax mentality and in their consciousness to be citizens, which is the base of their inner acceptance of tax duties and acknowledgment of the sovereignty of the state.” (p. 97f).
Bruno Frey & Benno TorglerTax morale = intrinsic motivation to comply
16
□
□
□□□□□
□□□
□ □□
□ □□
Italy
Belgium
PortugalSpain
Sweden
Norway
FinlandNetherlands
IrelandFrance
Switzerland
GermanyDenmark
Great BritainAustria
USA
0
10
20
30
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Degree of Tax Morale
Siz
e of
Sha
dow
Eco
nom
y (in
% o
f the
GD
P)
Attitudes drive behavior (Schmölders: tax morale)
Tax morale and size of shadow economy (Alm & Torgler, 2005)
1717
Lay theories
Lay theories are often explained on the basis of the Theory of Social Representations (Moscovici, 1981)
1818
Social representations[...] a system of values, ideas and practices with a
twofold function; first, to establish an order [...] and secondly to enable communication to take place among the members of a community [...] (Moscovici, 1961/1973)
• „Common-sense-theories” on fundamental issues that are of concern to the community (Moscovici & Hewstone, 1983); everyday knowledge
• Combine psychological and sociological elements (social groups, strata)
1919
Definition: Wagner (1994)Social representations are …: Metaphoric images, representations, conceptions of socially relevant phenomena; often pictographically-symbolically, linguistically expressed; unite cognitive, affective, evaluative and conative aspects Perspective of individual knowledge-systemsFormation processes, change-dynamics and elaborations in social interactions, in everyday discourse, in social/societal discourse Perspective of collective discourseA concept, which makes it possible to refer social and individual analysis-systems to each other and to explain how social processes lead to individual, socially grounded representations
Perspective of „macro-reduction of individual knowledge systems to social processes”
2121
Social representations comprise:• Core: determines the meaning and identity of a social
representation and consists of explicit or implicit fundamentals of the representations
and• Periphery: protects the core, to adjust the social
representation to context and time.
Social representations develop through:• Anchoring: The unfamiliar is classified and ascribed with a
meaning. • Objectification: The abstract concepts are turned into
something concrete and assume real respectively physical representations (e.g. the word „bravery” is envisaged as a hero)
22
Society,social groups
Threatening or unfamiliar phenomenon or event (e.g. implementation of the Euro, publication of the theory of psychoanalysis)
Collective examination, search for related contents, copies etc.
Anchoring to and interpretation on the basis of familiar contents and representations.
The social discourse leads to objectification, i.e. to representations in the form of pictures, metaphors, symbols, etc.
The unfamiliar phenomenon becomes familiar and part of common sense
Novel social representation
Social identity
The “world” of the society or social
group is enriched by a novel
representation
The novel representations adds to the social identity
of the society or social group
Sociogenesis of social representations (Wagner et al., 1999)
2323
Attitudes
Allport (1935, p. 810): “A mental and neural state of readiness, organised through experience, exerting a directive or dynamic influence upon the individual’s response to all objects and situations with which it is related.”
Stroebe (1980): Attitudes towards an attitude object consist of
The opinions on the object (cognitive aspect)
The sympathy (affective aspect) and
The behavioral intentions (conative aspect).
2424
AttitudesThomas (1991)
Affect
Cognition
Behavior
Attitude object (people, social
groups, situations, actions etc.)
Measurable independent variable
Intervening variable
Measurable dependent variable
Attitude
Reactions of the autonomic
nervous system; verbal comments
on emotions
Perceptual judgments; verbally uttered
opinions
Manifest behavior; information on own
behavior
2525
Attitudes and behavior
Attitudes cannot be observed directly, but represent a relevant basis of behavior.
26
Measuring attitudes
• Psychobiological level: – E.g. pulse rate, electrodermal responses, ECG, EEG,
fMRI (neuro-economics)– Registration of eye movements (search of information
sequence of information search):
„Spotlight – Viewer”: Selective attention of the consumers while watching advertisements
Advantage: Little technical, financial, organizational, and temporal effort in comparison to classical eye-tracking
Information search: the spotlight-viewer (…rather than eye tracking) (Berger, 2009)
E.g., experiments on information search (audit probability, fines, social norms…)
2828
Measuring attitudes
• Behavioral observation – E. g., “lost letters”
• Surveys and interviews – Qualitative methods (e.g. in-depth interviews)– Quantitative methods (e.g. direct surveys)– Combined methods (e.g. associations)
2929
Qualitative methods
• In-depth interview: Collection of associations with the “object”: inquire all “object” attributes that are deemed important and then analyze the cognitive structure that lies behind them by repeatedly asking “why-questions”
• Focus groups: The interaction provides an insight into complex behavioral patterns and personal motives: host, video or audio recordings
• Qualitative-quantitative method: Associative network (see below)
3030
„Direct” attitude measurement
How do you rate taxes [VAT, income tax, etc.]?
Remember: Not the attitude per se is measured “directly”, but the verbally uttered opinions are inquired directly.
Very bad Bad Neither Good Very good
Quantitative methods
3131
Likert’s method of added ratings
Attitudes as disapproval or approval of an attitude object
Development of the scale:• Collection of favorable and unfavorable statements• Multi-point rating of agreement – disagreement• Item analyses & selection, administration of the scale • The added score of the answers represents the attitude
index
3232
Likert method – an example
Paying taxes on time is a citizen’s duty
Cheating on taxes is a minor crime
Strongly agree
Strongly disagree
1 2 3 4 5
5 4 3 2 1
3333
Multi-attribute-models
Fishbein (1963), Fishbein & Ajzen (1975): • Only few object features/traits are
perceived• Attitude as a function of the subjective
probability and evaluation of these traits
Aij = 1/n * ∑ (Pijk * Eijk)k=1
n
Probability that k is present
Evaluation of trait k
3434
Multi-attribute-models - exampleTrait of X How likely is this trait? How do You evaluate
this trait?
Unlikely Likely Bad Good
honest
responsible
1 7 1 7
Attitude = 1 / 2 * ( (3 * 5) + (5 * 1) ) = 10
„safe” „expensive”2 mentioned
traits
35
Not wrong A bit wrong Wrong Seriously wrong
Attitudes towards taking undue benefits and not declaring income (bar charts indicate percentages of judgments of morally wrong behaviour, lines indicate percentages of people who might show the behaviour; adopted from Orviska and Hudson (2002, p. 91)
Total sample
Sample below 40 years
0%
10%
20%
30%
40%
50%
60% Taking undue benefits Not declaring income
Morally wrong (bar charts)Not wrong A bit wrong Wrong Seriously wrong
Very likely Fairly likely Not very likely
Not at all likely Very likely Fairly likely Not verylikely
Not at all likely Would do(lines)
Representations of taxes
Although most citizens appreciate public goods and agree with policy regulations, people neither like to pay taxes to fund public goods nor to pay so called corrective taxes.
People like public goods but claim taxes are too high!
3737
TaskTAX-I
38
3939
Semantic differential („classic” method; Osgood, 1970)
ActiveGoodUglyFast
WeakBig
PowerfulFriendly
…
Passive BadBeautifulSlowStrongSmallPowerlessUnfriendly…
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
1 2 3 4 5 6 7
Potency
Activity
Valence
A B
4040
Semantic differential (description vs evaluation; Peabody, 1985)Basic idea: separation of the evaluative and descriptive components
Example: Description of the manner/demeanor of a company on the market via pairs of traits such as prudent/imprudent, timid/bold Use of prudent or bold→ Evaluation of the company is positiveUse of timid and imprudent→ Evaluation of the company is negative Use of prudent or timid→ Description of the company as risk-averseUse of bold or imprudent→ Description of the company as willing to take risks
4141
Evaluative aspect = (scale a + scale b) /2Descriptive aspect = |scale a – scale b| /2 or reverse one scale
X evaluative aspect = (1 + 3) /2 = 2 descriptive aspect = (-1 + 3)/2 = 1
thrifty +3 +2 +1 0 -1 -2 -3 extravagant
stingy -3 -2 -1 0 +1 +2+3
generous
X
thrifty +3 +2 +1 0 -1 -2 -3 extravagant
stingy -3 -2 -1 0 +1 +2+3
generous
Y
Y evaluative aspect = (-1 + -1) /2 = -1 descriptive aspect = (1 + -1)/2 = 0
Semantic differential (description vs evaluation; Peabody, 1985)
4242
Analyses: • Content of the associations • Evaluation (+/0/-): “polarity index”, “neutrality index”• Sequences: in combination with the frequency of “core” and “peripheral” • Links
Too high 1 -
Unjust 5 +
Burden 2 +
Necessary 3 0
Theft 4 -
Evil 6 +
Associative network (de Rosa, 1993)
TaskTaxes
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
- 0 +
Semantic Differential
Honest taxpayers are…
Tax evader
Tax evader
Tax evader
Honest taxpayer
Honest taxpayer
Honest taxpayer
44
Lazy versus hard-working
Stupid versus intelligent
Typical taxpayer
Honest taxpayer
Tax evader
Typical taxpayer
Honest taxpayer
Tax evader
Negative versus positive evaluation
Typical taxpayer Honest taxpayer
Descriptive dimensions
Evaluative components
Judgments of “typical taxpayers”, “honest taxpayers”, and “tax evaders” (Semantic Differential - Peabody)
Tabl
e 1:
Jud
gmen
t s o
f tax
paye
r s (
valu
es r
ange
from
-3
t o +
3) D
escr
ipt iv
e di
men
sion
st y
pica
l tax
hone
st t a
xt a
x ev
ader
paye
rpa
yer
__
____
____
____
____
____
____
____
____
____
____
____
____
___
16.la
zy -
har
d-w
orki
ng. 3
6 a
1.46
b
. 52
c17
.stu
pid
- in
tel li
gent
- .
22 a
. 24
b 1.
10 c
Tabl
e 2:
Eva
l uat
ive
com
pone
nts
of r
atin
gs o
f tax
paye
r s b
y em
plo y
men
t gr o
up t y
pe o
f tax
p aye
rbl
ue- c
oll a
rw
hite
- col
l ar
civi
len
t re-
stud
ent
t ota
l
wor
ker
wor
ker
ser v
ant
pren
eur
____
____
____
____
____
____
____
____
____
____
____
____
____
____
____
____
____
____
____
_ __
_ t ypi
cal t
axpa
yer
- .28
- .56
- .26
- .43
- .44
- .38
hone
st t a
xpay
er. 3
1. 3
0. 7
0. 3
3. 3
2. 4
0t a
x ev
ader
. 10
. 14
- .06
- .03
. 31
. 08
Taxevader
4545
BLUE COLLAR WORKERS
Public deficit
Criticism of the government
Associations to taxes of entrepreneurs, civil servants, students, white, and blue collar workers (explained variance: Dimension 1 = 38%; Dimension 2 = 30%; Dimension 3= 17%; Kirchler, 1998)
Dim
ensi
on
2
Dimension 3Dimension 1
1.50
-.690 -.80
0.86
-1.36
-.77
0
.89
Lack of clarity Technical tax termsEconomic regulator
Not categorized
BureaucracyNames of politicians and political institutions
Punishment and disincentive
Tax evasionNecessary evil
Social security
Social welfareSocial justice
CIVIL SERVANTS
Salary and income
Financial loss
Criticism of politicians
Instrument for politicians
Public goods
Public constraintSTUDENTSENTREPRE
NEUERS
WHITE COLLAR WORKERS
4646
Attitudes and behavior
• Hidden measurment:• Haire (1950): Customers complained about the
taste and smell of the novel product instant coffee. Judgments were seen as “rationalizations”, a negative attitude was suspected. Indirect method: Construction of two shopping lists of a hypothetic housewife, description of this housewife
4747
Indirect attitude measurement (Haire, 1950)
½ kg bread1 kg sugar
1 pack coffee beans2 kg apples
1 salami1 head of lettuce
½ kg bread1 kg sugar
1 pack Nescafe2 kg apples
1 salami1 head of lettuce
Described as „lazy”, „ill planning”, „wasteful”, „with little sense of family”
4848
Indirect attitude measurement
Imagine an entrepreneur who is
married, with two children, runs a firm…
evades taxes.
Imagine an entrepreneur who is
married, with two children, runs a firm…
avoids taxes.
Imagine an entrepreneur who is
married, with two children, runs a firm… pays on time correct
taxes.
Describe the entrepreneur, the personality, etc.