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Journal of the Australasian Tax Teachers Association 2019 Vol.14 No.1 1 FACTORS THAT INFLUENCE TAX EVASION PERCEPTIONS IN AUSTRALIA AND TURKEY:A STRUCTURAL EQUATION MODEL STUDY KEN DEVOS* AND METIN ARGAN ABSTRACT The tax literature indicates that many factors impact upon and influence tax evasion and non-compliant behaviour. This study makes a contribution to the literature by investigating specific economic and tax variables that influence tax evasion perceptions. By employing a structural equation model using self-reported taxpayer data from both Australia and Turkey, the study examines the structural relationships between national well-being, life satisfaction, tax involvement and tax evasion. The findings reveal that significant positive and negative relationships exist between the selected variables. The results will be of interest to the Australian and Turkish governments, and have implications for tax policy development in both countries. * Corresponding author: [email protected]; +61 3214 3353. Associate Professor, Faculty of Business and Law, Swinburne University (Hawthorn Campus). Professor, Anadolu University. Email: [email protected].

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Page 1: FACTORS THAT INFLUENCE TAX EVASION PERCEPTIONS ......ethics,3 all play key roles in determining levels of tax evasion. In the economic literature, there has been evidence of other

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FACTORSTHATINFLUENCETAXEVASIONPERCEPTIONSINAUSTRALIAANDTURKEY:ASTRUCTURALEQUATIONMODELSTUDY

KENDEVOS*ANDMETINARGAN†

ABSTRACTThetaxliteratureindicatesthatmanyfactorsimpactuponandinfluencetaxevasionandnon-compliant behaviour. This study makes a contribution to the literature byinvestigatingspecificeconomicandtaxvariablesthatinfluencetaxevasionperceptions.Byemployingastructuralequationmodelusingself-reportedtaxpayerdatafrombothAustraliaandTurkey,thestudyexaminesthestructuralrelationshipsbetweennationalwell-being, life satisfaction, tax involvement and tax evasion. The findings reveal thatsignificantpositiveandnegativerelationshipsexistbetweentheselectedvariables.Theresults will be of interest to the Australian and Turkish governments, and haveimplicationsfortaxpolicydevelopmentinbothcountries.

*Correspondingauthor:[email protected];+6132143353.AssociateProfessor,FacultyofBusinessandLaw,SwinburneUniversity(HawthornCampus).†Professor,AnadoluUniversity.Email:[email protected].

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I INTRODUCTION

Thetaxliteratureindicatesthatmanyfactorsimpactuponandinfluencetaxevasionandnon-compliantbehaviour.Inparticular, it iswelldocumentedinthetaxliteraturethatfairness of the tax system,1 compliance and enforcement,2 and taxpayer morals andethics,3allplaykeyrolesindetermininglevelsoftaxevasion.Intheeconomicliterature,therehasbeenevidenceofotherfactorsthathaveimpacteduponeconomicgrowthandthe well-being of a country’s citizens. These include the issues of rivalry amongstindividuals regarding income levels, overestimation of the benefits of increasedconsumption,andgenerallyalevelofinequalityinsociety.4Theselatereconomicfactorshavealsoinfluencedtaxevasionbehaviour.However, it is evident that, while tax and economic studies have investigated thesefactors independently, there are few that have combined the factors into a trulyinterdisciplinarystudy.Thispaperproposestoovercomethisresearchgap,andmakesacontributiontotheexisting literatureby investigatingthreespecificeconomicandtaxfactors that impact upon tax evasion perceptions. The study uniquely employs astructuralequationmodel(‘SEM’),andinparticularexplorestherelationshipsbetweennationalwell-beingandlifesatisfaction,taxinvolvementandlifesatisfaction,aswellaslife satisfaction and tax evasion. Following a recent study investigating tax evasionattitudesinAustraliaandTurkey,5thisstudybuildsonthatpriorresearchbyexaminingthreedistinctrelationshipsinanSEM,employingself-reportedtaxpayerdatafrombothAustraliaandTurkey.

TherationaleforcomparingAustraliaandTurkeywasthediverse,economic,religiousandculturaldifferencesthatexistbetweenthetwocountries,andhowthosedifferencesmaypotentiallyimpactupontheresults.TheAustralianlegalsystemisbasedoncommonlaw, while Turkey is a civil law jurisdiction. Australian society is of predominatelyChristianbelief,whileTurkey is predominately ofMuslimbelief. Australian culture islargelyamixofAnglo-SaxonandAboriginal,althoughargumentscouldbemountedforamoremulticultural society nowadays, while Turkey has strong European andMiddleEasternties.6CollaborationbetweenAustralianandTurkishuniversitieswasestablishedtoconducttheresearch,whichreportsontheopinionsofbothTurkishandAustraliantaxpayerswithregardstotaxevasion.

1FrankCowell,‘TaxEvasionandInequity’(December1992)13(4)JournalofEconomicPsychology521.2 Joel Slemrod,WhyPeople Pay Taxes: Tax Compliance and Enforcement (University ofMichigan Press,1992).3MichaelWenzel,‘TheSocialSideofSanctions:PersonalandSocialNormsasModeratorsofDeterrence’(ConferencePaper,CentreforTaxSystemIntegrityCanberraConference,AustralianNationalUniversity,2003);KristinaMurphy, ‘TheRoleofTrust inNurturingCompliance:AStudyofAccusedTaxAvoiders’(2004)28LawandHumanBehaviour187.4ThomasGriffith,‘ProgressiveTaxationandHappiness’(2004)45BostonCollegeLawReview1363.5RobertMcGee,KenDevosandSerkanBenk, ‘AttitudestowardTaxEvasioninTurkeyandAustralia:AComparativeStudy’(2016)5(10)SocialSciences1.Thisstudyemployedstudentdataasopposedtorealtaxpayers.6Ibid11.

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Thispaperisstructuredasfollows.Aftertheintroduction,abriefbackgroundofboththeAustralianandTurkishtaxsystemsisprovidedinSectionII.ThisisfollowedbyareviewoftherelevantliteratureandthedevelopmentofthehypothesestobetestedinthisstudyinSectionIII.SectionIVproceedstodescribetheresearchmethod,includingthevariousmeasuresandsamplingemployed.SectionVprovidesadiscussionandanalysisof theresearchresults,includingparticipantdemographics,statisticalanalysisofthevariablesemployedandtheSEM.Finally,SectionVIconcludesbysummarisingthemainfindingsandtaxpolicyimplications,andnotesthestudy’squalificationsandpossibleavenuesforfutureresearch.

II BRIEFOVERVIEWOFTHEAUSTRALIANANDTURKISHTAXSYSTEMS

A TheAustraliantaxsystemAustraliaoperatesunderaself-assessmenttaxsystem,wherebycitizenslodgetheirtaxreturn(eithertaxagent-assistedornot)basedonanhonestdisclosure.Thetaxreturninformation is taken as correct andwill only be verified upon an audit,whereby anydiscrepancies may be subject to penalty. The Australian Taxation Office (‘ATO’) hasenormouscapacitytodealwiththeadministrationofsome15milliontaxreturns,alongwiththeeducationalandenforcementactivitiesitconducts.TheAustraliangovernment’spower to impose taxes comes from the Australian Constitution. Section 51(ii) of theConstitutiongrantsthegovernmentpowertoimposelawswithregardstothecollectionandadministrationoftaxes.7Compliancelevelsarerelativelyhighdespitehavingoneofthemorecomplextaxsystemsintheworld,basedonanumberoflegislativeacts.However,asaresultofthecomplexnatureofthetaxlawandrelativelyhightaxrates(incometaxispayableatprogressiverates,andthegoodsandservicestax(‘GST’)rateis10percent),therehasbeenevidenceof tax evasion and avoidance,which the government has placed greater emphasis ontargetinginrecentyears.8Inparticular,theATOhasidentifiedevidenceoftaxevasionactivity—forexample,throughcertainlabourhirearrangementsthatusediscretionarytruststosplitincome,diversionofpersonalservicesincometoself-managedsuperfunds,andotherarrangementsthatexploitmismatchesbetweentrustandtaxableincome.9

7KerrieSadiqetal,PrinciplesofTaxationLaw2019(ThomsonReuters,12thed,2019).8Thegovernmentintroducedmultinationalanti-avoidancelegislationin2016,andadivertedprofitstaxof40percentin2017,toassistincurbingtaxavoidancebymultinationalcorporations.Additionalresourcesinthe2019FederalBudgethavealsobeenallocatedtoassistinthisregard,signallingthegovernment’sintensiontoreduceavoidance.9‘SchemesWeHaveIdentified’,AustralianTaxationOffice,AustralianGovernment(WebPage,19June2018)<https://www.ato.gov.au/general/tax-planning/tax-avoidance-schemes/schemes-we-have-identified/cited>.

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B TheTurkishtaxsystemThepowertotaxinTurkeyisfoundintheFoundationDecree,wherethedutiesoftheDepartmentofTaxpayerServicesarealsooutlined.10Therearethreemaintypesoftaxesin Turkey, which are derived from various sources. These include income tax,expenditure and wealth taxes. Income tax is imposed upon both individuals andcorporations, with progressive tax rates applying to various income brackets forindividuals.Withholdingtaxonwagesvarieswithincomelevel,whilethecorporatetaxratewasfixedat22percentinthe2018taxyear.Taxesonexpendituresincludevalueaddedtaxatastandardrateof18percent,withareducedrateof8percentforapplicablebasic foodstuffs, for example. Taxes on wealth mainly cover real estate and motorvehicles.Therehasbeenevidenceof taxevasionandavoidance inTurkey,whichhastakentheformof‘undocumentedcommercialtransactions’,whiletheresultsofauditingactivitiesrevealedthattherewassomeTL38,715,354,158discrepancyinassessmentsfortheyearended2005.11Despitegovernmenteffortstotargetthistaxdiscrepancyinrecentyears,arguably tax evasion is alreadywidespreaddue to the largepresenceof the informaleconomy.

III LITERATUREREVIEWANDHYPOTHESISDEVELOPMENT

Thefollowingsectionreviewstheliteratureonthekeyvariablesemployedinthisstudy,namely tax involvement, national well-being, life satisfaction and tax evasion. Therelevantresearchhypothesestobetestedinthisstudyinclude:

H1:Thelevelofaperson’staxinvolvementhasapositiveeffectontheirlevelof lifesatisfaction.

H2:Thelevelofaperson’snationalandsubjectwell-beinghasapositiveeffectontheirleveloflifesatisfaction.

H3:Thelevelofaperson’slifesatisfactionhasanegativeeffectontheirleveloftaxevasion.

A TaxinvolvementThereappearstobenospecificdefinitionof‘taxinvolvement’outlinedintheliterature,butithaspreviouslybeendescribedasconsistingofthreefactors.First,whatroleoridealdoestaxplayinaperson’slife,andhowcentralisittotheperson’sfunctionality.Second,how does a person think about tax, and are they conscious ofwhat role tax plays insociety.Third,doestaxationhaveanyparticularpurposeormeaninginaperson’slife.12

10PresidencyofRevenueAdministration,DepartmentofTaxpayerServices,TurkishGovernment,Taxationin Turkey (Publication No 21, September 2006) 33<https://www.gib.gov.tr/sites/default/files/fileadmin/user_upload/yayinlar/Taxation.pdf>.11Ibid41.12 Takanori Sumino, ‘Level or Concentration? A Cross-National Analysis of Public Attitudes towardsTaxation Policies’ (2016) Social Indicators Research 129, 1115–34; Valerie Braithwaite, ‘How DoAustraliansThinkaboutTax’ (SeminarPaper, ‘PublicPerceptions:Making theConnectionbetweenTaxInvestmentandReturn’,PerCapitaWorkingSeminar,:7July2009).

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Otherstudieshavealsodevelopedanddefinedtheconceptoftaxinvolvementfromtheperspectiveofself-interest,forexample,focusingonhowAustraliansthinkabouttax,anddiscovering that tax outcomes and processes need to be respectful of people’s self-interest.13 This, in particular, pertains to the democratic collective self that expectsgovernmenttodeliverinexchangefortaxpayercooperation,andexpectstoberespectedasacitizen.Thiswouldincludeataxpayer’strustinthetaxauthority.14Taxinvolvementmayalsoencompassaperson’scompetitiveselfthataspirestowealth,powerandstatusinsomecases,andtojob,familyandhomeinothers.Inparticular,ataxpayer’sopportunity for investmentandprosperityare consideredalongwith theiropportunityfortaxminimisationandavoidance.15Forexample,ifapersonwantstobeagoodperson,andseenashonestandlawabiding,theirtaxinvolvementwillbeacceptableto the tax authority.16 This would also encompass a taxpayer’s attitude towards taxevasion and the employment of ethical tax advisers to ensure a plausible outcome isachieved. Clearly all these elements are critical in determining how connected andinvolvedapersoniswithtaxation.Aself-interestapproachisequallyapplicabletoananalysisofanindividual’spreferencesand involvement intaxation,aswasdiscoveredbySumino.17The findingsofSumino’sstudystronglysupportaninstitutionalistunderstandingoftaxbehaviour.Inparticularthe results reveal that attitudinal differences among different income groups becomemoresalientinhigher-taxedsocieties.18Basedontheseresults,Suminoconcludedthat‘tax targeting’ does not have an interactional effect on the income–attitude linkage.Rather, relative to tax level, concentrated taxation might be invisible or hidden toordinary citizens.19 Consequently, if taxpayers do not notice the degree of taxconcentrationintheircountrythenitisnotsurprisingthattheyfailtoreacttotaxpolicies,orthattheburdenoftaxpoliciesarehighincomparisontotheexpectedbenefits.20Assuch,taxpayershavelittletaxinvolvement,understandingorinterest.Evidence of howdifferent people think about tax and the role it plays in societywasuncoveredinastudybyLim,SlemrodandWilking.21Theirstudyaimedtoinvestigatetheviewsofbothtaxexpertsandthegeneralpublicregardingvarioustaxpolicyissues.Notsurprisingly,giventhedifferentleveloftaxinvolvementandtaxknowledgeofthetwosamples,strikinglydifferentviewswerediscovered.Inparticular,thetaxexpertswerelargelyinfavourofthegovernment’sroleintheredistributionoftaxrevenues,whilethegeneral publicwerenot. This couldbe attributed to experts being trained to thinkofpolicychangesinabalanced-budgetframework,whereasthegeneralpublicarenot.22Itis also acknowledged that differences in demographics, values and views about the

13Braithwaite(n12).14Ibid.15Ibid.16Ibid.17Sumino(n12).18Ibid1131.19Ibid.20Ibid1131–2.21DianeLim,JoelSlemrodandEleanorWilking,‘ExpertandPublicAttitudestowardsTaxPolicy’(2013)66(4)NationalTaxJournal775.22Ibid803.

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economic consequences of tax policy alternatives may have also contributed to thedifferentiatedresults.23Theself-interestargumentexplaininglevelsoftaxinvolvementwasalsouncoveredbyBraithwaite.24BraithwaiteemployedanSEMtogaugetaxpayerattitudes to taxpolicy,andinparticularGST.Self-interestwasasignificantfactorinshapingattitudes,withthosefeelingthetaxburdenexpressingsupportforthegoaloftaxationefficiency.25Self-interestwasfoundtoberelevantandhadaroletoplayinpolicyevaluationandtaxinvolvement.Self-interest can also be gauged by how much a taxpayer thinks about taxationimplicationsforthemselves.Forexample,Prabhakarfoundthatprinciplesareimportantinshapingpublicattitudestotaxation,andthat,inparticular,peoplethinkaboutboththebenefitsandcostsoftaxation.26AlthoughPrabhakar’sfindingsrevealedthatthepublicmakes systematic mistakes about taxation and that tax knowledge is lacking, theysuggestedthatwhilethemajorityof taxpayersmaynotbedirectly involvedinthetaxsystemthereisevidenceofthoughtandconsiderationtowardstax.27Forthepurposesofthisstudy,thefollowingdefinitionoftaxinvolvementisadopted:theroleoridealtaxplaysinaperson’slife;howcentralitistotheperson’sfunctionality;howaperson thinksabout tax; therole taxplays insociety;andwhether taxationhasanyparticularpurposeormeaninginaperson’slife.

B LifesatisfactionLife satisfaction refers to a cognitive judgementalprocess, andhasbeendefinedas ‘aglobalassessmentofaperson’squalityoflifeaccordingtohis/herchosencriteria’.28Itisimportanttonotethatthekeyfactorhereishavingpersonalcriteriaandvaluesinwhichtogaugeoveralllifesatisfaction.Itisnotimposedexternally,anddifferentcomponentsoflifewillmattermoreorlessfordifferentindividuals.Besidestheaffectiveemotionalaspectsofthelifesatisfactionconstruct,thecognitive-judgementalaspectsarecritical,andhenceaccuratemeasurementrequiresamulti-itemscale,accordingtoworkcarriedoutbyDieneretal,29whichisemployedinthisstudy.It is also evident that life satisfactionmay vary greatly depending on an individual’scircumstances,andmayormaynotnecessarilyberelatedtohappiness.Forexample,animportantaspectofhappinessandlifesatisfactionistheinclinationtohavemoremoney.However, do individuals overestimate and misjudge the value of money? Additionalhappinessdoesnotnecessarilycomewithadditionalconsumption.30Mostpeoplethinkthata25percentincreaseintheirpaywouldgreatlyincreasetheirsatisfactionwiththeir

23Ibid798.24Braithwaite(n12).25Ibid.26RajivPrabhakar,‘WhatDothePublicThinkofTaxation?EvidencefromaFocusGroupStudyinEngland’(2012)22(1)JournalofEuropeanSocialPolicy77.27Ibid81.28DohShinandDanJohnson,‘AVowedHappinessasanOverallAssessmentoftheQualityofLife’(1978)5SocialIndicatorsResearch474.29EdDieneretal,‘TheSatisfactionwithLifeScale’(1985)49JournalofPersonalityAssessment71;seealsoKen Devos, ‘The Impact of Life Satisfaction on Tax Evasion Perceptions in Australia’ (2017) 8(3)InternationalJournalofAdvancedBiotechnologyandResearch197.30Griffith(n4);Devos(n29).

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lives, but individuals who are currently at that level do not report greater lifesatisfaction.31 Aspiration theory holds that an individual’s aspirational level rises asincomerises,andthisaspirationallevelissomewhathigherthantheircurrentincome.32Theactualincreaseinwelfareislessthanwhatactuallyoccursand,assuch,theincomeincreasecanbedisappointing.33Inadditiontostudiesonincomeandwelfare,dataonlifesatisfactionandhappinesshasalsobeentakentobeadirectproxyforutility.Frijters,JohnstonandShieldsemployedlife satisfactiondata to examine the issue of optimal taxation.34 EmployingAustraliandata, the study found that under an optimal scheme those with the lowest marginalsatisfactionwithincomewouldbetaxedmoreheavilyinfavourofthosewiththehighermarginalsatisfactionwithincome.35Theresultswouldbeindicativeofwhetherornotcurrenttransferpoliciesmanagetotaxthosewithlittlemarginalsatisfactionwithincomecomparedtothosewithhighermarginalsatisfactionwithincome.36Theexceptionwasyounger, single Australianswho are taxed farmore heavily than their highmarginalsatisfactionwithincomewouldpredict.37Thesefindingsmayhaveimplicationsfortaxevasion motivations, in that those who believe they are unfairly overtaxed maypotentiallyevadetax.38Inexamininglifesatisfactionlevels,changesinaspirationallevelsmaydiminishthegainsfrom additional consumption.39 Consequently, if increased working hours results inadditionaltaxesandlessleisuretime,itispossiblethiswillbeadisincentiveforpeopleto work harder/longer. In this case, the opposite effect of decreased working hoursresultinginlessmoneymayencouragetaxevasion,aspeoplelookforotherwaystofillthe income void. Peoplemay look for the additional income/benefits via tax evasionratherthanearningitbyconductingextrawork.40Thisstudyadoptstheabovedefinitionoflifesatisfactionas‘aglobalassessmentofaperson’squalityoflifeaccordingtohis/herchosencriteria’.41As indicated by Braithwaite, self-interest is amajor factor or reasonwhy people getinvolvedwithtaxation.42Thatis,thereisanaturaldesiretobecomemoreprosperousorwealthy by understanding and appreciating the intricacies of taxation. Further, bothGriffithandLanefoundthathavinggreaterwealthandutilitycontributestohigherlifesatisfaction.43 Consequently, this study examines the relationship between these two

31RobertLane,TheLossofHappinessinMarketDemocracies(YaleUniversityPress,2000);Devos(n29).32Lane(n31).33EdDienerandEunkookMarkSuh,‘NationalDifferencesinSubjectWellBeing’inDanielKahneman,EdDiener and Norbert Schwarz (eds), Well-being: The Foundations of Hedonic Psychology (Russell SageFoundation,1999)ch22,434,435;Devos(n29).34 Paul Frijters, David Johnston andMichael Shields, ‘TheOptimality of Tax Transfers:WhatDoes LifeSatisfactionDataTellUs?’(2012)13JournalofHappinessStudies821;seealsoDevos(n29).35Frijters,JohnstonandShields(n34).36Ibid;seealsoDevos(n29).37Frijters,JohnstonandShields(n34);Devos(n29).38SeealsoDevos(n29).39Griffith(n4).40Ibid.41ShinandJohnson(n28).42Braithwaite(n12).43Griffith(n4);Lane(n31).

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variablesandhypothesises that the levelof aperson’s tax involvementhasapositiveeffectontheirleveloflifesatisfaction.

C Nationalandsubjectwell-beingTheconceptofnationalwell-beingisinterpretedverywidelyandisoftenalignedwiththeconceptofsubjectwell-beingintheliterature.Acommonfeatureinthesubjectwell-beingliteratureistheassumptionthatthenetresourcesofapersonmatter,whethertheyare aware of it or not, and that individuals with a higher living standard generallyexperiencehighersubjectwell-beinglevels.44Subjectwell-beingasasubsetofnationalwell-beingcanalsobeconsideredinaculturalcontext.DaveyandRato foundthatsubjectwell-beingwasnormative insampleswithvariedsocio-economicvariables.45TheyexaminedChina’spersonalwell-beingscoresforcitizens in Hong Kong, Macau and Zhuhai, and found that they were similar despitedifferentcultural,societalandwealthissues.46ThestudyindicatedthatimprovedlivingstandardsforChina’sgrowingmiddleclasshashadminimalinfluenceonsubjectwell-being.47Sowheretheeconomicsituationhasimprovedinabsoluteterms,thetaxpayers’relativeincomepositionhasdeterioratedduetorisingincomeinequality.48TherearesimilarfindingsinWesternnations,wherethereisagapbetweenincomesandmaterialaspirationsandwheremoneyandmaterialismbringcostsaswellasbenefits.49Inthisregard,thecomparisonofnationalwell-beinginbothAustraliaandTurkeyinthepresent study should also provide further insights as to whether differences in theculture,religionandlegalsystemsofeachcountryhaveimplicationsfortaxevasion.Likewise, Oishi et al suggest that indicators of citizen’s cognitive judgements of theirsociety are also important, and include trust in national institutions, tolerance, socialcohesion, social trust and fear of crime.50 The general class of subjective indicatorsinclude measures of people’s attitudes and values, evaluations, and perceptions asderivedfromtheirownexperiences.51Hence,thepresenceofmoneyandfinancialgainaloneasanindicatorofnationalwell-beingbecomesquestionable,asisthecasewithlifesatisfaction.

Consequently,theliteratureappearstobemixedwithregardstowhatconstitutesbothsubjectandnationalwell-being.Griffithindicatesthatpeopletendtooverestimatethebenefitsofadditionalconsumptionandwealth,andthatthisdoesnotnecessarilyleadtogreaterlifesatisfaction.52Rather,Oishietalindicatethatitispeople’svalues,attitudes

44AlpaslanAkayetal, ‘HappyTaxpayers?IncomeTaxationandWell-Being’(DiscussionPaperNo6999,InstituteofLaborEconomics,2012).45GarethDaveyandRicardoRato,‘SubjectiveWellbeinginChina:AReview’(2012)13JournalofHappinessStudies333.46Ibid344.47Ibid.48HilkeBrockmannetal,‘TheChinaPuzzle:FallingHappinessinaRisingEconomy’(2009)10(4)JournalofHappinessStudies387.49DaveyandRato(n45).50ShigehiroOishi,UlrichSchimmackandEdDiener,‘ProgressiveTaxationandtheSubjectiveWell-BeingofNations’(2012)23(1)PsychologicalScience86.51Ibid90.52Griffith(n4).

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andperceptionstowardslifethatarecriticalinassessingnationalwell-being.53However,ifgreaterwealthandutilitycontributetoahigherstandardof livingit ispossiblethatbothsubjectandnationalwell-beinghavealsobeenenhanced.

Thisstudyadoptstheabovedefinitionofsubjectandnationalwell-being,whichisalignedtopeople’svalues,attitudesandperceptionstowardslife.Therefore,thestudyproceedstoexaminetherelationshipbetweenthesetwovariables,andhypothesisesthatthelevelof a taxpayer’s national and subjectwell-being has a positive effect on the level of ataxpayer’slifesatisfaction.

D TaxevasionTaxevasioncanbedescribedastheillegalnon-paymentoftaxproperlyowingunderthelaw.Itisdistinguishedfromtaxavoidance,whichislegalbutagainstthespiritofthelaw,andtaxplanning,whichcanalsobedescribedastaxminimisation,whichiswithinboththespiritandlegalconfinesofthelaw.However,ablurringbetweentaxavoidanceandtaxevasionhascomeaboutthroughanincreaseinaggressivetaxplanning.Astaxpayersrigorouslytrytoplantopaylesstax,theyruntheriskofgoingtoofar,andtheiractionscanconsequentlyresultintaxevasion.Taxevasionhasalsobeendefinedasintentionalnon-compliance, and this definition has been adopted in this paper. A review of theliteratureindicatesthattherearenumerousfactorsthathaveinfluencedandimpactedupontaxevasionovertheyears,butitisunclearwhetherlifesatisfactionpersehashadanimpactupontaxevasionperceptions.54

Ajzen and Fishbein found that taxpayers’ behaviour is directly determined by theirintentions,whicharea functionoftheirattitudetowardsbehaviourandperceptionofsocialnorms.55Thisinfersthattaxevasionmotivationscouldariseasaresultofpeople’speers and community standards. Other researchers have concluded that tax evasioncouldalsobeinfluencedbyeducatingtaxpayersoftheirsocialresponsibilitytopay.56

Other social and psychology studies have found that the fairness and equity of a taxsystemalsoimpactsuponcomplianceandevasion.57Inparticular,thenotionof‘exchangeequity’(wheretaxpayersbelievetheyarenotreceivingthebenefitsfromthegovernmentin exchange for taxespaid) affects compliance.Wallschutzky found that the exchangerelationshipwasthemostimportanthypothesisexplainingwhytaxpayerswhoevadedtaxfeltjustifiedindoingso.58Wallschutzkyalsofoundthattheburdenoftaxeswasthe

53Oishi,SchimmackandDiener(n50).54 Marianne Richardson and Adrian Sawyer, ‘A Taxonomy of the Tax Compliance Literature: FurtherFindings,ProblemsandProspects’(2001)16AustralianTaxForum137;BettyJacksonandValerieMilliron,‘TaxComplianceResearch:Findings,ProblemsandProspects’(1986)5 JournalofAccountingLiterature125.55IcekAjzenandMartinFishbein,UnderstandingAttitudesandPredictingSocialBehavior(PrenticeHall,1980).56RobertCialdini,‘SocialMotivationstoComply:Norms,ValuesandPrinciples’inJeffreyARothandJohnTScholz(eds),TaxpayerCompliance:SocialSciencePerspectives(UniversityofPennsylvaniaPress,1989)vol2,200.57IanWallschutzky,‘PossibleCausesofTaxEvasion’(1984)5(4)JournalofEconomicPsychology371.58IanWallschutzky,‘TaxpayerAttitudestoTaxAvoidanceandEvasion’(ResearchStudyNo1,AustralianTaxResearchFoundation,1985),ascited inKenDevos, ‘AnInvestigation intoAustralianPersonal“Tax

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mainjustificationforincreasedlevelsoftaxevasionandthattaxadviserswereperceivedtohaveasignificantimpactupontaxpayersavoidingtax.59Socialpsychologystudieshavealsoexaminedtheimpactofethicsandmoralvaluesupontax evasion. Indeed, much of the empirical work that has been carried out by socialresearchersinthisareatendstorefutetheeconomicmodelofcompliance(thatis,thattaxpayersareutilitymaximisingcreatureswhoonlyweighuptheexpectedcostsofnon-compliance against the potential gains) in its basic form.60 For example, it has beendemonstrated,bymeansof laboratoryexperiments,61 that evenwhere thedeterrencefactor is so low that evasion makes obvious economic sense, some individualsneverthelesscomplyduetotheirhightaxmoralsandvalues.62Historically,therehavebeenthreemainviewsregardingthemoralityoftaxevasion.63Atoneextreme is the firstmainview, thatevadingtaxes is immoralandthatonehasanabsolutedutytopaywhatevertaxesthegovernmentdemands.Severaljustificationshavebeengivenforthisposition,basedonreligiousandauthoritariangrounds.64Attheotherextremeisthesecondmainview,thatevadingtaxesisneverimmoral.Thosewhoespousethisviewoftenbelievethatallgovernmentsareillegitimateandneednotbeobeyedorsupportedfinancially.65Thethirdmainviewisthattaxevasionmaybejustifiedonmoralgroundssometimes.Thisviewistheprevalentviewinthetheological,philosophicalandempiricalliterature.66

The literaturesuggests thatpeople’s life satisfaction isarguablypreoccupiedwith theaccumulationofwealthand increasedconsumption.However,as indicatedbyGriffith,the opportunity cost of earning additional income is the loss of leisure time and the

Evaders”—TheirAttitudestowardsComplianceandthePenaltiesforNon-Compliance’(December2009)19RevenueLawJournal1;seealsoDevos(n29).59Wallschutzky,‘TaxpayerAttitudes’(n58).60Devos,‘AnInvestigationintoAustralianPersonal“TaxEvaders”’(n58).61 JamesAlm,IsabelSanchezandAnaDeJuan, ‘EconomicandNoneconomicFactors inTaxCompliance’(1995)48(1)Kyklos3.62Devos,‘AnInvestigationintoAustralianPersonal“TaxEvaders”’(n58).63 Robert McGee, ‘The Ethics of Tax Evasion: A Survey of Romanian Business Students and Faculty’(WorkingPaper Series,Andreas School ofBusiness, September2005), reprinted inRWMcGee andGGPreobragenskaya,AccountingandFinancialSystemReforminEasternEuropeandAsia(Springer,2006)299;RWMcGee,MBasicandMTyler,‘TheEthicsofTaxEvasion:ASurveyofBosnianOpinion’(2009)11(2)JournalofBalkanandNearEasternStudies197;MartinCrowe,TheMoralObligationofPayingJustTaxes(CatholicUniversityofAmericaPress,1944).64McGee,BasicandTyler(n63);Devos,‘TheImpactofLifeSatisfaction’(n29).65 Martin Crowe, Andrew Ross and Robert McGee, ‘Education Level and Ethical Attitude toward TaxEvasion:ASix-CountryStudy’(2012)15(2) JournalofLegal,EthicalandRegulatoryIssues93;LysanderSpooner,NoTreason:TheConstitutionofNoAuthority(1870);Devos,‘TheImpactofLifeSatisfaction’(n29).66Fortheological literature,seeCrowe,RossandMcGee(n65).Forphilosophical literature,seeRobertMcGee,‘IsTaxEvasionUnethical?’(1994)42UniversityofKansasLawReview411.Forempiricalliterature,seeJamesAlmandBennoTorgler,‘CulturalDifferencesandTaxMoralintheUnitedStatesandinEurope’(2006)27JournalofEconomicPsychology224;RobertMcGeeandGuoZhiwen,‘ASurveyofLawBusinessandPhilosophyStudentsinChinaontheEthicsofTaxEvasion’(2007)2SocietyandBusinessReview299;BennoTorgler,TaxComplianceandTaxMorale:ATheoreticalandEmpiricalAnalysis(EdwardElgar,2007);Benno Torgler et al, ‘Causes and Consequences of Tax Morale: An Empirical Investigation’ (2008) 38EconomicAnalysisandPolicy313.SeealsoDevos,‘TheImpactofLifeSatisfaction’(n29).

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disincentive towork longer hours.67 This situation has implications for the increasedmotivationfortaxevasionandavoidance.Asindicatedintheliteratureabove,therearemyriad factors that contribute to tax evasion, including fairness,68 exchange equity,69people’sethics/morals,70andperceptionsandsocialnorms.71However,itisarguedthatwheretaxpayersareateasewithallthesefactorstheyaremorelikelytobesatisfiedwithlife,andlessinclinedtobeinvolvedintaxevasion.Consequently,thisstudyproceedstoexaminetherelationshipbetweenthesetwovariablesandhypothesisesthatthelevelofataxpayer’slifesatisfactionhasanegativeeffectontheleveloftaxevasion.TheresearchmodeldescribedinFigure1showstherelationshipsamongthevariables.

Figure1:Conceptualmodel

IV METHODOLOGY

A MeasuresA questionnaire instrument for the empirical study of the relationships among taxinvolvement,nationalwell-being,lifesatisfactionandtaxevasionwasdevelopedonthebasisofpreviousresearchandscale-developingprocedures.Thescaleoftaxinvolvementwas developed by the authors according to the scale-development procedurerecommendedbyChurchill.72TodevelopinitialitemsinTurkey,acombinationofdataderived from in-depth interviews (23 taxpayers), in addition to a review of the taxinvolvement literature,wasapplied.Subsequently,asetof itemsdesignedtomeasureeachtaxinvolvementdimensionwasdeveloped.Theitemswerepurifiedbasedonapilot

67Griffith(n4).68JamesVogel,‘TaxationandPublicOpinioninSweden:AnInterpretationofRecentSurveyData’(1974)27NationalTaxJournal499;ThomasPorcano, ‘CorrelatesofTaxEvasion’(1988)9JournalofEconomicPsychology47;GerritAntonidesandHenryRobben,‘TruePositivesandFalseAlarmsintheDetectionofTaxEvasion’(1995)17JournalofEconomicPsychology617.69Wallschutzky,‘TaxpayerAttitudes’(n58).70Crowe,RossandMcGee(n65).71Devos,‘TheImpactofLifeSatisfaction’(n29).72GilbertChurchill Jr, ‘AParadigm forDevelopingBetterMeasuresofMarketingConstructs’ (February1979)16JournalofMarketingResearch64.

H3 -

National Well-being (NAT-WELBE)

Tax Involvement (TAX-INVOL)

Life Satisfaction (LIFE-SATI)

Tax Evasion (TAX-EVASI)

H1+

H2+

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study(52taxpayers)andexpertopinion,assuggestedbyChurchill.73Alltheitemsofthetaxinvolvementscalearemeasuredbyaseven-pointLikertscale,rangingfrom‘stronglydisagree’(1)to‘stronglyagree’(7).Cronbach’sαwas0.79fortheentirescaleand0.73,0.75and0.79foritssubscales,respectively(seeTable2).Thescaleofnationalwell-beingconsistedofsixitemsretrievedfromastudybyDaveyandRato.74Thesixitemspertainingtonationalwell-beingwereansweredonafive-pointend-definedLikert scale, anchored from ‘very bad’ (1) to ‘very good’ (5),with higherscores indicating a strong tendency for satisfaction.The six itemsmeasuringnationalwell-being had a very satisfactory value of 0.93 for Cronbach’s α (see Table 4). Asatisfactionwith lifescalewasadoptedtoassessa taxpayer’sdegreeofsatisfaction inlife.75 The three items measuring life satisfaction had a Cronbach’s α of 0.87, whichindicatesacceptableinternalconsistency(seeTable4).76Finally,thisstudyemployedataxevasionscale,whichincluded18statementsregardingthereasonsgiventojustifytaxevasion, developed by Crowe, Ross and McGee.77 All the items of the scales for lifesatisfactionandtaxevasionweremeasuredbyaseven-pointLikertscale,rangingfrom‘stronglydisagree’(1)to‘stronglyagree’(7).Cronbach’sαwas0.92fortheentirescale,and0.93,0.92and0.86foritssubscales,respectively(seeTable6),indicatingsatisfactoryvalue.78

B SamplingSamplinginthisstudycomprisedtaxpayerswhoresidedintwocountries,AustraliaandTurkey. These two countries display marked economic, social and cultural diversity,therebyproviding a goodbasis for exploring and comparing their perceptions on taxinvolvement,nationalwell-being,lifesatisfactionandtaxevasion.Thetaxpayersselectedweregenerallyself-preparers,andthemajority(99percent inAustraliaand92.5percentinTurkey)wereemployed(seeTable1),meaningthattheywereactivelyconcernedwithtaxissues.Aconveniencesamplingmethodwasusedtoapplythequestionnaire.InTurkey,datawascollectedviaquestionnairesthatspecificallytargetedcitizenswhopaytax. Out of 650 questionnaires distributed at popular places in Eskişehir, 480questionnaireswere returned, resulting in anoverall response rateof73per cent. InAustralia, an online questionnairewas conducted via awebsite for 45days to collectsampledata.79Onaverage,thequestionnairetook15minutestocomplete.Atotalof64surveys(28inTurkey,36inAustralia)weredeemedunusableduetoinvalidresponses(forexample,blank,doubleanswers,etc)andwerethereforeeliminatedfromthesample.Thetotalnumberofusablerespondentswas733(480inTurkey,253inAustralia).

73Ibid.74DaveyandRato(n45).75Dieneretal(n29).76JaneNunnallyandIanBernstein,PsychometricTheory(McGrawHill,3rded,1994).77Crowe,RossandMcGee(n65).78Devos,‘TheImpactofLifeSatisfaction’(n29).79‘Home’,Qualtrics(WebPage,2019)<http://www.qualtrics.com>.

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V DISCUSSIONANDANALYSISOFRESEARCHRESULTS

A DemographiccharacteristicsofparticipantsTable 1 displays the demographic characteristics of the respondents who are fromTurkeyandAustralia.ThelargestgroupofrespondentsinTurkey(63.1percent)weremale,however,thegenderratiowasapproximatelyequalinAustralia.Intermsofmaritalstatus,26.7percentoftheAustralianrespondentsweremarried,and61.1percentofTurkishrespondents.Whenaveragemonthlyincomewasexamined,thelargestgroupofTurkishrespondents(42.7percent)hadamonthlyincomeofAUD930orless.However,23.7 per cent ofAustralian respondents (the largest group) had amonthly incomeofAUD3,001–6,000. In both countries, the proportion of respondents with anundergraduateeducationallevelorequivalentwashigh—49percentforTurkey,and44.6percentforAustralia.AsshowninTable1,therewasawiderangeofoccupationgroups,however,theratioofofficeworkersinAustralia(30.8percent)wasmuchhigherthananyotheroccupationalgroupexamined.

Table1:DemographiccharacteristicsofrespondentsTurkey(N=480) Australia(N=253) f % f %Gender Gender Male 303 63.1 Male 127 50.2Female 177 36.9 Female 126 49.8Maritalstatus Maritalstatus Married 293 61.1 Married 67 26.7Single 171 36.6 Single 150 59.8Other 16 3.3 Other 34 13.5Educationlevel Educationlevel Primaryorsecondary 50 10.4 Primaryorsecondary 25 10.0Highschoolorequivalent 157 32.7 Highschoolorequivalent 58 23.1Undergraduateorequivalent 235 49.0 Undergraduateorequivalent 112 44.6Postgraduateorqualification 38 7.9 Postgraduateorqualification 56 22.3Monthlyincome Monthlyincome AUD930and< 205 42.7 Undeclared 52 20.6AUD931–1,860 152 31.7 AUD3,000and< 41 16.2AUD1,861–2,790 54 11.3 AUD3,001–6,000 60 23.7AUD2,791–3,720 29 6.0 AUD6,001–9,000 33 13.0AUD3,721and> 40 8.3 AUD9,001–12,000 29 11.5 AUD12,001and> 38 15.0Occupation Occupation Officeworker 81 16.9 Officeworker 78 30.8Retailorshopworker 83 17.3 Retailorshopworker 22 8.7Retired 36 7.5 Retired 1 0.4Homeduties 17 3.5 Homeduties 3 1.2Manager 38 7.9 Manager 59 23.3Tradesperson 85 17.8 Tradesperson 21 8.3Student 39 8.1 Student 5 2.0Other 63 13.1 Other 64 25.3Self-employed 38 7.9

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B Measures

1 TaxinvolvementThe tax involvementscalewas first subjected toexploratory factoranalysis (‘EFA’) todelineate the underlying factors. EFA with Varimax rotation, particularly useful forcheckingtheunique(explained)anderror(unexplained)varianceofaspecificvariable,80wasemployedonthetaxinvolvementdata.TheKaiser–Meyer–Olkin(‘KMO’)amountedto0.727,whichindicatedthatthesamplewasadequateforfactoranalysis.Bartlett’sTestof Sphericity was 1,336.123 (p < 0.01), indicating that the hypothesis variance andcovariancematrixofvariablesasan identitymatrixwasrejected; therefore the factoranalysiswasappropriate.Table2indicatesthatallthefactorloadingshadsatisfactoryvaluesgreaterthanthecut-offvalueof0.40.81The results of the EFA reveal three valid factors entitled ‘role and centrality’,‘consciousness’, and ‘meaning in life’. These three factors regarding tax involvementexplained66.83percentof thetotalvariance,whichisasatisfactory levelofvarianceexplanationaccordingtoHairetal,82whiletheeigenvaluesrangedfrom1.97to3.02.Allthreefactorscomprisedtwostatements,eachconcerningthedirectorindirectattributesoftaxinvolvement.Thefirstfactorof‘roleandcentrality’includedtwoitemswithregardstotax’sroleinlife.The‘consciousness’factorcomprisedtwoitemsregardingthesubject’sconsciouscitizenship.Similarly, two items inrelation to ‘meaning in life’madeup thethirdfactor.

Table2:FactorsanditemsrelatedtothetaxinvolvementscaleFactors Std

loadTUR AUS t

Mean SD Mean SDRoleandcentrality 5.03 1.50 4.13 1.27 8.07*Taxhasacentralroleinmylife 0.76 4.83 1.78 3.98 1.43 Iknowthetaxratebecauseitencompassesmanyareasofourlives

0.81 5.22 1.64 4.29 1.40

Consciousness 5.81 1.31 5.33 1.11 4.98*Ireallylikebeingaconsciouscitizen 0.78 5.57 1.57 5.12 1.30 Peopleneedtobeinformedcitizens 0.84 6.08 1.38 5.55 1.10 Meaninginlife 5.58 1.56 4.87 1.44 6.08*Taxmeansnothingtomeǂ 0.94 5.58 1.73 4.76 1.61 Taxdoesnotmattertomeǂ 0.78 5.59 1.74 4.96 1.42 CR=0.76,0.79,0.85,respectively,accordingtofactors.AVE=0.62,0.66,0.75,respectively,accordingtofactors.Reliability(Cronbach’sα)=0.73,0.75,0.79,respectively,accordingtofactors.ǂReversestatement;entirescale(sixitems)reliability=0.79*p<0.01

80JosephHairetal,MultivariateDataAnalysis(PrenticeHall,6thed,2006).81NunnallyandBernstein(n76).82Hairetal(n80).

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Significantdifferencesappearedbetweenthetwocountriesinrelationtoallthreefactors(t=8.07,t=4.98,t=6.08,respectively)withregardstotax involvement(seethe lastcolumninTable2).TheresultsindicatedthatthesampledTurkstendedtohaveaslightlystrongertaxconscience(m=5.81)thantheAustralians(m=5.33).Likewise,taxplayedamorecentralroleinthelivesofTurks(m=5.03)comparedtoAustralians(m=4.13),and,overall, taxmeantmore toTurks (m=5.58) than toAustralians (m=4.87).Oneexplanationforthedifference intax involvementgenerallycouldbeduetoattitudinaldifferencesbetweenthedifferentincomegroupsoftheTurksandtheAustraliansinthissample,asfoundbySumino.83AstheEFAindicesshowedasatisfactorylevel,theconfirmatoryfactoranalysis(‘CFA’)wasthenemployedtotestthefitofthemeasurementmodelfortaxinvolvement.Astheχ2valueissensitiveinalargesample,theresearchersmostlyreferredtoadditionalfitindices.Forthisreason,thegoodness-of-fitofthemodelwasassessedwiththenormedfitindex(‘NFI’),thenon-normedfitindex(‘NNFI’),thecomparativefitindex(‘CFI’),therootmeansquareerrorofapproximation(‘RMSEA’),thegoodness-of-fitindex(‘GFI’),theadjustedgoodness-of-fitindex(‘AGFI’),andthestandardisedrootmeansquareresidual(‘SRMR’). Hu andBentler suggested a 0.95 cut-off point for CFI and 0.09 for SRMR.84AccordingtoChiuandWang,AGFIandNNFIshouldexceed0.8and0.9,respectively.85Additionally,accordingtoBrowneandCudeck,RMSEAvalueshigherthan0.10indicateapoorfit,whilevaluesof0.08or lessrepresentenoughfit,andvaluesof lessthan0.06indicateagoodfit.86Table3:CFAresultsontaxinvolvement

Fitindices

Wholesample(N=733)

(TUR+AUS)

Turkeysample(N=480)(TUR)

Australiasample(N=253)(AUS)

Acceptable

level

χ2/df 2.33 2.21 1.12 <5RMSEA 0.043 0.050 0.022 <0.08SRMR 0.016 0.021 0.016 <0.08IFI 1.00 0.99 1.00 >0.90NFI 0.99 0.99 0.99 >0.90NNFI 0.99 0.98 1.00 >0.90CFI 1.00 0.99 1.00 >0.90GFI 0.99 0.99 0.99 >0.90AGFI 0.98 0.97 0.97 >0.90

83Sumino(n12).84LinHuandPeterBentler,‘CutoffCriteriaforFitIndexesinCovarianceStructureAnalysis:ConventionalCriteriaVersusNewAlternatives’(1999)6(1)StructuralEquationModeling1.85 CM Chiu and Ed Wang, ‘Understanding Web-Based Learning Continuance Intention: The Role ofSubjectiveTaskValue’(2008)45Information&Management194.86MichaelBrowneandRobCudeck,‘AlternativeWaysofAssessingModelFit’inKennethABollenandJohnScottLong(eds),TestingStructuralEquationModels(Sage,1993)445.

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AsseeninTable3,theratiosoftheχ2valuetodegreesoffreedom(χ2/df=2.33,2.21,1.12,respectively)werelessthanthecut-offpointof3,assuggestedbyBagozziandYi.87Thefitindicesoftaxinvolvementinthewholesample(RMSEA=0.043,CFI=1.00,NFI=0.99, IFI = 1.00) revealed an acceptablemodel fit. Furthermore, GFI (0.99) and AGFI(0.98)weregreaterthantherecommendedvalueof0.9.RMSEAwas0.043,whichislessthan0.08.88Therefore,theoverallfitofthefullstructuralmodelwassatisfactory.

2 Nationalwell-beingandlifesatisfactionCFAwasusedtoassessthescalesrelatingtonationalwell-beingandlifesatisfaction.Theresults illustrate reliability coefficients and descriptive statistics (mean and standarddeviation) about the factors and items. Both national well-being and life satisfactionrepresentaunidimensionalconstruct(seeTable4).89NostatisticallysignificantdifferencewasdiscoveredbetweentheAustralian(m=2.56)andTurkish(m=2.65)sampleswithregardstonationalwell-being.Consistentresultsappeared with respect to national security, economic, environmental and socialconditions.Theresultsalsofoundnoconnectionbetweenincomeinequalityandwell-being perceptions, which is consistent with the findings of Diener and Oishi.90 ThefindingsarealsoconsistentwithDaveyandRato’sstudy,whichfoundthattherewasnodifferenceinwell-beingperceptionsforpeopleofdifferentcultural,societalandwealthbackgrounds.91Itisnotedthatself-reportsonsubjectwell-beingcanbeofalowqualityandvulnerableto external disturbance and arbitrary measures. However, it is acknowledged that acombined happiness method, developed by Ng, may overcome these problems andimprovetheevaluationofoverallnationalwell-being.92Itisarguablewhetheranincreaseinanindividual’ssubjectwell-beingcanbeequatedwith‘aparticularkindofsensation’— happiness, according to Kelman.93 Consequently, other approaches to measuringsubject well-being should be considered, and have been adopted in this study whenconsideringthebroaderconceptofnationalwell-being.94Therewasevidenceofasignificantdifferentiation(t=-4.57,p>0.01)withregardstothelifesatisfactionscoresbetweenthetwocountries.TheAustraliancitizens’lifesatisfaction(m=4.80)washigherthanthatofTurkishcitizens(m=4.29).WhileAustralianswerehappierwiththeirlifeconditionsandprospectsthanTurks,itisimportanttonotethat

87RichardBagozziandYoujaeYi,‘OnEvaluationofStructuralEquationModels’(1988)16JournaloftheAcademyofMarketingScience74.88Hairetal(n80)7.89Devos,‘TheImpactofLifeSatisfaction’(n29).90EdDienerandShigehiroOishi,‘MoneyandHappiness:IncomeandSubjectWell-BeingacrossNations’inEdDienerandEunkookMSuh(eds),CultureandSubjectiveWell-Being(MITPress,2000)ch8,198;seealsoDevos,‘TheImpactofLifeSatisfaction’(n29).91DaveyandRato(n45);seealsoDevos,‘TheImpactofLifeSatisfaction’(n29).92Yew-KwangNg,‘HappinessSurveys:SomeComparabilityIssuesandanExploratorySurveyBasedonJustPerceivableIncrements’(1996)38SocialIndicatorsResearch1.93MarkKelman, ‘HedonicPsychology and theAmbiguities of “Welfare”’ (2005)33Philosophy&PublicAffairs391.94HaiouZhou,‘ANewFrameworkofHappinessSurveyandEvaluationofNationalWellbeing’(2012)108SocialIndicatorsResearch491.

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measurementisdifficultandthatbothinternalandexternalfactorscouldplayavitalroleininfluencingthislevel.95Australiaoffers,potentially,amorestablepoliticalandsocialsystem thanTurkey, and thismay have also contributed to the result. The differencebetweenthosewithlittlemarginalincomesatisfactioncomparedtootherswithhigherincome satisfactionmay have also been another reason for the difference in the lifesatisfactionscores.96

Table4:Factorsanditemsrelatedtoscalesofnationalwell-beingandlifesatisfaction97Factors Std

loadTUR AUS t

Mean SD Mean SD Nationalwell-being 2.65 1.08 2.56 0.51 1.24Economicsituationinmycountry 0.87 2.71 1.19 2.50 0.60 Thestateofthenaturalenvironmentinmycountry

0.77 2.82 1.17 2.55 0.65

Socialconditioninmycountry 0.89 2.65 1.16 2.62 0.70 Governmentinmycountry 0.87 2.63 1.36 2.44 0.71 Businessinmycountry 0.83 2.41 1.18 2.60 0.59 Nationalsecurityinmycountry 0.81 2.66 1.31 2.66 0.66 Lifesatisfaction 4.29 1.53 4.80 1.22 -4.57*Inmostwaysmylifeisclosetomyideal 0.84 4.43 1.70 4.59 1.29 Theconditionsofmylifeareexcellent 0.86 3.82 1.70 4.77 1.34 Iamsatisfiedwithmylife 0.81 4.61 1.78 5.04 1.35 CR=0.94,0.88,respectively,accordingtofactors.AVE=0.72,0.70,respectively,accordingtofactors.Reliability(Cronbach’sα)=0.93,0.87,respectively,accordingtofactors.Entirescale(nineitems)reliability=0.90*p<0.01

TheresultsoftheCFAsuggestthatthefitmeasurementofthemodelwasacceptable.Inthewholesample,thevaluesoftheotherfitindiceswerealsofoundtobeacceptable:CFI=0.99;IFI=0.99;RMSEA=0.061;NFI=0.99;NNFI=0.99;andSRMR=0.019.Thefitindicesofnationalwell-beingandlifesatisfactionfortheTurkeysample(χ2/df=2.74,RMSEA=0.061,CFI=0.99,NFI=0.99,IFI=0.97)alsorevealedanacceptablemodelfit.However,theAustraliansamplerepresentedpoorvaluesintermsofRMSEA(0.095)andAGFI (0.89). All the other Australian statistics were within the acceptance ranges,indicatingagoodfittothedataoverall(seeTable5).

95ShinandJohnson(n28).96Frijters,JohnstonandShields(n34).97Devos,‘TheImpactofLifeSatisfaction’(n29).

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Table5:CFAresultsonlifesatisfactionandnationalwell-beingFitindices

Wholesample(N=733)

(TUR+AUS)

Turkeysample(N=480)(TUR)

Australiasample(N=253)(AUS)

Acceptablelevel

χ2/df 3.73 2.74 3.26 <5RMSEA 0.061 0.061 0.095 <0.08SRMR 0.019 0.023 0.044 <0.08IFI 0.99 0.97 0.97 >0.90NFI 0.99 0.99 0.96 >0.90NNFI 0.99 0.99 0.96 >0.90CFI 0.99 0.99 0.97 >0.90GFI 0.97 0.97 0.93 >0.90AGFI 0.95 0.94 0.89 >0.90

3 TaxevasionCFAwasconductedtoassess18 items in thetaxevasionscale.Seven itemsof the taxevasionscalewereremovedduetolowfactorloadingsormulti-factorialloading.Table6displaysfactorloadings,reliabilitycoefficients,andAVEvaluesregardingtaxevasion.Inline with the literature, the factors fell under the general headings of ‘fairness’, ‘taxsystem’and‘discrimination’.‘Fairness’includedfiveitems,whichincorporatedfairnessperceptions. The ‘tax system’ factor comprised three items, which incorporatedperceptionsconcerningtaxratesandusage.Threeitemsinrelationto ‘discrimination’issuesmadeupthethirdfactor.Inaddition,significantdifferencesregardingtaxevasionbetweenthetwocountrieswerediscoveredinrelationtothe‘taxsystem’factor(t=4.07,p>0.01)andthe‘discrimination’factor(t=3.91,p>0.01)(seeTable6).98The results indicate that Australians were more sensitive to the ethical issuessurroundingthetaxsystem(m=2.60)thanTurks(m=3.20).Likewise,Australiansweremoresensitivetoethicalissuesaroundtaxdiscrimination(m=2.88)comparedtoTurks(m = 3.46). However, both the Turks and Australians had similar perceptions withregardstotaxfairnessissues(Turks=2.08andAustralians=2.18).Thelatterresultisconsistentwith previous findings on the impact of tax fairness perceptions upon taxevasion,99 and indicates that, regardless of culture, tax fairness is universal. Oneexplanationforthedifferenceinrelationtothetaxsystemcouldbethat,astheAustraliantaxsystemisquitecomplexandtaxratesarehighrelativetoTurkey,thereisthepotentialfor greater avoidance/evasion. It also appears that tax evasion perceptionswere notjustifiedondiscriminationgrounds,butrathertherewasevidenceofadutytopaytax.ThisfindingisalsoconsistentwithpreviousstudiesbyMcGeeandCrowe.100

98Devos,‘TheImpactofLifeSatisfaction’(n29).99MarkSpicer,‘ABehaviouralModelofIncomeTaxEvasion’(PhDThesis,OhioStateUniversity,1974);LMTan,‘Taxpayers’PerceptionsoftheFairnessoftheTaxSystem—APreliminaryStudy’(1998)NewZealandJournal of Taxation Law and Policy 59; Young-dahl Song and Tinsley Yarbrough, ‘Tax Ethics and TaxAttitudes:ASurvey’(1978)58PublicAdministrationReview442;ChrisChan,ColeenTroutmanandDavidO’Bryan, ‘AnExpandedModelofTaxpayerCompliance:EmpiricalEvidence from theUnitedStates andHongKong’(2000)9JournalofInternationalAccounting,AuditingandTaxation83.100Crowe,RossandMcGee(n65);seealsoDevos,‘TheImpactofLifeSatisfaction’(n29).

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Table6:Factorsanditemsrelatedtotaxevasionscale

Factors Stdload

TUR AUS tMean SD Mean SD

Fairness 2.08 1.34 2.18 1.37 -0.92Taxevasionisethicalevenifmostofthemoneycollectedisspentwisely

0.85 1.98 1.55 2.13 1.40

Taxevasionisethicalevenifalargeportionofthemoneycollectedisspentonworthyprojects

0.89 1.99 1.53 2.16 1.48

Taxevasionisethicalifalargeportionofthemoneycollectedisspentonprojectsthatdonotbenefitme

0.91 2.25 1.70 2.20 1.39

Taxevasionisethicalevenifalargeportionofthemoneycollectedisspentonprojectsthatdobenefitme

0.90 1.96 1.46 2.15 1.41

Taxevasionisethicaliftheprobabilityofgettingcaughtislow

0.85 2.20 1.72 2.23 1.50

Taxsystem 3.20 2.04 2.60 1.58 4.07*Taxevasionisethicaliftaxratesaretoohigh 0.87 3.01 2.20 2.40 1.59 Taxevasionisethicalifthetaxsystemisunfair 0.91 3.29 2.27 2.69 1.65 Taxevasionisethicalifalargeportionofthemoneycollectediswasted

0.92 3.28 2.22 2.70 1.72

Discrimination 3.46 1.99 2.88 1.73 3.91*TaxevasionwouldbeethicalifIwereaJewlivinginNaziGermanyin1940

0.71 3.40 2.20 3.10 2.02

Taxevasionisethicalifthegovernmentdiscriminatesagainstmebecauseofmyreligion,raceorethnicbackground

0.92 3.51 2.30 2.76 1.77

Taxevasionisethicalifthegovernmentimprisonspeoplefortheirpoliticalopinions

0.89 3.45 2.35 2.79 1.88

CR=0.95,0.93,0.88,respectively,accordingtofactors.AVE=0.78,0.81,0.71,respectively,accordingtofactors.Reliability(Cronbach’sα)=0.93,0.92,0.86,respectively,accordingtofactors.Totalscale(11items)reliability=0.92*p<0.01

Theoverall fit of themodel to thedata, especially for theAustralian sample,wasnotstrongduetotheinadequatefitindicesofRMSEA(0.14),GFI(0.85)andAGFI(0.75).HuandBentlersuggestedthatifGFIandAGFIperformpoorly,theyarenotrecommendedfor evaluating model fit, and rather other better fit indices should be considered.101Moreover,BagozziandYiindicatedthatalltheindicesthatexceed0.80shouldmeettherespectiveminimumcriteriaandshowgoodness-of-fittothedataandtheoreticalmodeloverall.102Inparticular,theCFAresultsachievedforthewholesampleandtheTurkeysamplewereacceptable.Basedonthesefindings,itcanbeconcludedthatthemodelofthetaxevasionscalewasempiricallysupported(seeTable7).

101HuandBentler(n84);seealsoDevos,‘TheImpactofLifeSatisfaction’(n29).102BagozziandYi(n87);seealsoDevos,‘TheImpactofLifeSatisfaction’(n29).

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Table7:CFAresultsontaxevasion

Fitindices

Wholesample(N=733)

(TUR+AUS)

Turkeysample(N=480)(TUR)

Australiasample(N=253)(AUS)

Acceptablelevel

χ2/df 5.68 3.90 6.08 <5RMSEA 0.080 0.078 0.14 <0.08SRMR 0.032 0.036 0.038 <0.08IFI 0.99 0.98 0.97 >0.90NFI 0.98 0.98 0.96 >0.90NNFI 0.98 0.98 0.96 >0.90CFI 0.99 0.98 0.97 >0.90GFI 0.95 0.94 0.85 >0.90AGFI 0.91 0.91 0.75 >0.90

C Structuralequationmodel103Thehypothesised researchmodelwas empirically testedusing an SEM, using LISREL8.80. More precisely, the hypothesised model specifying the structural relationshipamongtaxinvolvement,nationalwell-being,lifesatisfactionandtaxevasionfitsthedatawell.Theχ2 is significant (p<0.01),which isusually the case for large sample sizes.ExceptforGFIandAGFI,alltheotherstatistics(χ2=987.30,df=289,χ2/df<5,CFI=0.98,IFI=0.98,NFI=0.97,NNFI=0.97,RMSEA=0.057,SRMR=0.08)werewithintheacceptanceranges,indicatingagoodness-of-fittothedata.

103ClaesFornellandDavidLarcker,‘EvaluatingStructuralEquationModelswithUnobservableVariablesandMeasurementError’(1981)28JournalofMarketingResearch39.

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Figure2:Structuralequationmodelamongdimensions

The path coefficient estimates (standardised beta and t values) of the model aresummarisedconciselyinFigure2.Thepathanalysissupportsthefindingthatallthreehypotheses are accepted. In other words, there were positive and significantrelationshipsbetweentheconstructsoflifesatisfactionandnationalwell-being(β=0.55,t=13.88,p<0.05),andlifesatisfactionandtaxinvolvement(β=0.08,t=2.10,p<0.05).Rationally, there was also a negative relationship between life satisfaction and taxevasion(β=-0.19,t=-4.57,p<0.05).Thestrongestrelationshipdisplayedwasbetweennational well-being and life satisfaction, a result that is strongly supported in theliterature.104

VI CONCLUSION

A SummaryandfindingsThe primarily purpose of this research was to examine particular tax involvementdimensionsthatrelatedtosamplesofbothTurkishandAustraliantaxpayers.Specifically,CFA was applied to verify the relationships between key variables comprising taxinvolvement,nationalwell-being,lifesatisfactionandtaxevasion.Thesecondaimofthisstudywastoexaminethestructuralrelationship,ifany,amongthesekeyvariables.

104Oishi,SchimmackandDiener(n50);Devos,‘TheImpactofLifeSatisfaction’(n29).

Fit statistics: χ2(289) = 987.30, p < 0.001, CFI = 0.98, IFI = 0.98, NFI = 0.97, NNFI = 0.97, RMSEA = 0.057, SRMR = 0.08, GFI = 0.91, AGFI = 0.89 Note:Topnumberisstandardisedcoefficient(β);tvaluesinparentheses

-0.19(-4.57)

NW-3

NW-2

NW-4

NW-1

NW-5

NW-6

0.08(2.10)

LE-3LS-1 LS-20.55(13.88)

DI-1

DI-2

DI-3

Disc

(SA

TX-1

TX-2

TX-3

Txsy

(SAT

FA-2

FA-3

FA-4

Fair

(SA

FA-5

FA-1

FA-2

FA-3 Role

(SATI

FA-1

FA-4

FA-5

FA-6

Mean

Cons

(SATI

FA-1 FA-1

FA-2

FA-1

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ThecurrentstudydevelopedandvalidatedtheAustralianandTurkishversionsofthetaxinvolvementscale.Thescaledemonstratedreliability,multidimensionalityandvalidity,aswellasconsistencyacrosstheTurkishandAustraliansamples.Thedimensionsoftaxinvolvement included ‘role and centrality’, ‘consciousness’ and ‘meaning in life’. Thefindingsrevealedthat thereweresignificantdifferencesbetweenthe twocountries inrelationtoallthreedimensionsregardingtaxinvolvement.TheCFAresultsinthecurrentstudyindicatethatthedimensionsoftaxevasioncanbeconceptualisedandmeasuredasathree-dimensionalconstructcomprising‘fairness’,‘taxsystem’and‘discrimination’.Asindicatedpreviously,thestructuralrelationshipsamongtax involvement, national well-being, life satisfaction and tax evasion in Turkey andAustraliawerealsoexaminedbyemployingtheappropriatescales.Theresultsrevealedthatparticularrelationshipsdidexistbetweenthesedimensions.Inparticular,theoverallresultsshowedthat lifesatisfactionplaysacentralrole inthemodel.Therelationshipbetween life satisfaction and tax involvement was statistically significant and isconsistentwithpreviousfindings.105Hence,thelevelofaperson’staxinvolvementhadapositive effect on their level of life satisfaction and H1 was accepted. Likewise, astatisticallysignificantpositiverelationshipwasfoundbetweennationalwell-beingandlifesatisfaction.Consequently,asthelevelofaperson’snationalandsubjectwell-beinghadapositiveeffectontheirleveloflifesatisfactionoverall,H2wasaccepted.

Aspredicted,anegativerelationshipwasfoundbetweenlifesatisfactionandtaxevasion,indicating that satisfactionwith lifemaybe amediatorbetween tax evasion, nationalwell-being and tax involvement. The results indicated that tax evasion and taxinvolvement also relate to national well-being and life satisfaction. Specifically, taxinvolvementandnationalwell-beingcorrelatedpositivelywithlifesatisfaction,however,satisfactionwith life had a significant negative effect on tax evasion perceptions. Theresults of the analysis were generally expected. That is, if taxpayers had greater taxinvolvementandwerepositiveaboutnationalwell-being,theyweremorelikelytohavegreater life satisfaction (positive relationship). Conversely, taxpayerswith greater lifesatisfaction would be less likely to harbour tax evasion perceptions (negativerelationship).Therefore,asthelevelofaperson’slifesatisfactionhadanegativeeffectontheirleveloftaxevasion,H3wasalsoaccepted.Otherpossiblereasonsexplainingthesignificantdifferencesbetweenthetwocountriesintermsofnationalwell-being,lifesatisfactionandallthedimensionsoftaxinvolvementcouldalsobeduetoculturaldifferences.Itwasexpectedthatthediversityinlegal,socialand economic values between Australia and Turkey would have contributed to thevarianceoftheresultstosomedegree.

B TaxpolicyimplicationsInvestigating taxpayer perceptions regarding nationalwell-being, life satisfaction, taxinvolvementortaxevasionisanimportantgovernmentalactivityofcitizen-orientatedcountries.Wherebothnationalwell-beingandlifesatisfactionexistamongstacountry’scitizensitencouragesloyaltyandprosperityintothefuture.Consequently,itisvitaltobuild a strong economy, and security systems,which represent key requirements for

105Griffith(n4);Lane(n31);ShinandJohnson(n28).

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generatinglong-termhappinessandlifesatisfaction.Inthisrespect,creationanddeliveryofhumanisticvaluesisanimportantantecedentofcitizenloyalty.Theresultsofthisstudyprovidesomevaluableinsightsintotherelationshipbetweentaxsystemsandcitizenshipissues.Itseemsthatthecombinationofnationalwell-beingandlifesatisfactionprovidedbygovernmentsnotonlyrelatestosocialissues,butalsotaxpayerperceptions.It is acknowledged that Australia currently has extensive compliance programmes inplace for its citizens. The ATO, for example, has become a world leader in taxadministration and provides a sophisticated website and educational services for itstaxpayers. However, this study revealed thatmore could be done to improve the taxfairness perceptions of Australian taxpayers,106 by promoting and advertising theservices taxpayers receive from the ATO. The government and social conditions inAustralia were shown to have implications for both national well-being and lifesatisfactionmeasuresintheSEM,whichinturninfluencetaxevasionperceptions.InTurkey,wherethetaxadministrationsystemisnotassophisticatedasAustralia’s,107issuesoftaxfairnessanddiscriminationarepresent,asrevealedthroughthisstudy.108Inthisregard,issuesofexchangeequity,andimprovementsindeterrentsandenforcementbytherevenueauthority,wereshowntohaveimplicationsforbothnationalwell-beingandlifesatisfactionmeasuresintheSEM,whichinturninfluencetaxevasionperceptions.Consequently,itisimportantthatbothgovernmentsgivedueattentiontoissuesoftaxfairness,andtaxeducationandenforcementinthecaseofTurkey,inordertobuildupthe knowledge and understanding of its citizens. In particular, this may also involveaddressing the issues of tax complexity, expenditures and transparency. This study’sfindingsindicatethatmanyissues,bothsocialandpsychological,mayeffectivelyshapeperceptionsinthetaxcontext.

C LimitationsandfuturestudiesAlthoughthisstudymakesavaluablecontributionintheareaoftaxevasionperceptions,somelimitationsarenoted.First,thescopeofthisstudywaslimitedtoonlytwocountries(Australia andTurkey),which limits the generalisability of the findings beyond thesecountries.Inaddition,asconvenientsamplingwasadoptedinbothAustraliaandTurkey,thesamplesarenotrepresentativeoftheirpopulationsandarenotnormallydistributedbutsomewhatskewed.109Thislimitationwasinitiallyrecognisedandacceptedinorderforthestudytobecarriedout.Second,asthetaxsystemsinthetwocountriesarequitedifferentfromeachother,itwashighlylikelythattheperceptionsofparticulartaxissueswouldvary.Therefore,futureresearchcouldexaminecomparativecountrieswithsimilartaxsystemsandcultures(forexample, collectivist, individualist), which would enhance the researchers’ ability togeneralisethefindingsbeyondjusttwocountries.110Third,whilethisstudyinvestigated

106PAHiteandMLRoberts,‘AnAnalysisofTaxReformsBasedonTaxpayers’PerceptionsofFairnessandSelf-Interest’(1992)4AdvancesinTaxation115;Chan,TroutmanandO’Bryan(n99);Tan(n99)60.107PresidencyofRevenueAdministration(n10)34–5.108SeetheTurkishstatisticalresultsregardingtaxevasioninTables6and7ofthispaper.109AQ-Qplotwasnotprovidedintheanalysistodeterminenormality.110Devos,‘TheImpactofLifeSatisfaction’(n29).

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onlyfourvariables,inpractice,taxpayersarepotentiallyexposedtomultiplevariablesthat may provide more effective tax dimensions. Future research could thereforeconsidertheimpactofadditionalvariablesandtheireffects,inordertoprovideamorecomprehensiveunderstanding.Finally, while the study employed a quantitative methodology, perhaps taking up aqualitativeapproachbywayofsemi-structuredinterviewsoftaxpayerscouldenhanceandenrichthefindingsandcross-validatepreviousresults.Traditionally,manycountrieshavepreferredtoassistcitizenswiththeirtaxobligationsratherthanjustintroducenewandmoreseveresanctions.Somecommentatorsarguethattheformercourseofactionisthebestwayforwardfortaxadministrationinthesecountries.111Inthisregard,thisstudyrevealedsomeoftherelationshipsbetweenkeyeconomicandtaxvariablesthatshouldbeconsideredinformulatinganytaxpolicymeasures.

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