How do Australians Think about Tax ?

Valerie BraithwaiteRegulatory Institutions Network

ANU

Public Perceptions: Making the Connection between Tax, Investment and Return, Per Capita Working Seminar, Canberra, 7 July 2009

Presentation Outline

Thinking Complexly about Tax – Alive and Well in the Community

Statistical Snapshots of What People Think About Tax and Democracy

A Model to Guide Understanding of How the Public Engage with Tax Reform

6 tax focused national mail surveys between 1999 and 2005

3 of these surveys tracked Australians responses to the tax reform process that saw the introduction of the goods and services tax (GST)

2000 survey was conducted pre-GST, 2001-2 survey was conducted after the GST came into effect in July 2001, 2005 survey was conducted after the reform process was bedded down

Thinking Complexly about Tax

Post the 2005 Federal Budget, Taxpayers were Asked:

Would the budget tax cuts make you financially better off?

• 7% thought they would be somewhat or much better off

• 28% thought they’d be a little better off

• 52% thought no better off, no worse off

• 13% didn’t know

Would the tax cuts make the tax system fairer ?

• 8% thought more fair

• 27% thought a little more fair

• 30% thought no difference

• 12% thought a little less fair

• 22% thought less fair

• 28% Reduced taxes

• 13% Depends

• 59% Spent more on social services and infrastructure

What should the government have done: reduced taxes or spent more on social services/infrastructure ?

• Self-interest? A little, not much

• Political party identification? A little more, but not much

• Values and social goals for the democracy? Yes

Drivers of attitudes to tax cuts or spending on social services and infrastructure?

Conclusion of these studies: The institutions of politics and the media crowd out and homogenize public views and engender helplessness and disinterest in the deliberative process

Comparison with attitudes to GST: Self-interest not very important, values and goals were “squashed” by political identification

Do you think the tax you pay is fair given the goods and services you receive from government?

37% 39% 34%

Would you prefer to pay less tax even if it means receiving a more restricted range of goods and services?

31% 38% 27%

How satisfied are you with the way the government spends taxpayers’ money?

15% 21% 17%

Snapshot Statistics of what Australians Think: How many Australians agree or say yes in 2000, 2002, and 2005 to questions on “value for money”?

I would be better off if I worked less given the rate at which I am taxed31% 29% 26%

Paying tax means I just can’t get ahead

28% 29% 29%

Paying tax removes the incentive to earn more income

56% 49% 48%

Snapshot Statistics of what Australians Think: How many Australians feel oppressed by taxation agreeing with the following in 2000, 2002 and 2005?

Do you think you should honestly declare all your tax earnings?

72% 72% 72% Yes

Do you think it is acceptable to overstate tax deductions in your return?

8% 7% 6% Yes

Do you think working for cash-in-hand payments without paying tax is a trivial offence?

32% 31% 28% Yes

Snapshot Statistics of what Australians Think: How many Australians feel a moral obligation to pay tax in 2000, 2002 and 2005 ?

Democratic collective self: a self that expects government to deliver in exchange for our cooperation, an expectation of being respected as a citizen

Competitive self: a self that aspires to wealth, power and status in some cases and to a job, family and home in others

Moral self: a self that wants to be honest and seen to be honest, as law abiding, as not needing to be fearful of authority, a good person

Conclusion: Tax reform in its outcomes and process needs to be respectful of these selves.

How is the Democratic Collective Self undermined ?

86

40

87

38

85

48

0 20 40 60 80 100

Disillusionment

Freemarket

Percent agree or strongly agree

Tax HFHE (L) 2005

Hope 2003

Tax CHFAS 2000

A comparison of levels of disillusionment with Australian democracy and support for small government and free markets 2000 - 2005

77

70

64

59

51

45

29

24

22

10

9

6

78

75

73

60

49

47

29

23

24

11

9

5

0 10 20 30 40 50 60 70 80 90

Chief executives

Owner managers

Senior judges and barristers

Surgeons

Doctors in general practice

Tax agents and advisors

Farm owners

Small business owners

Trades people

Waitresses

Farm labourers

Unskilled factory workers

Percent paying a bit less or much less than their fair share

Tax ATSFONS

Tax CHFAS

Perceptions of the degree to which different occupational groups are paying their fair share of tax

Reform action % of utmost importance2000

Ensure large corporations pay their share 60

Get rid of grey areas of tax law 40

Ensure wealthy pay more tax 37

Make amount of tax paid by large corporations public 34

Keep taxes as low as possible 31

Broaden tax base 30

Give corporation incentives to pay more tax 29

Keep costs of administering the system down 28

Make the system simpler 25

Improve competitiveness of Australian business 23

Look into a flat rate of tax 16

Get rid of tax deductions 8

Trust in Institutions

Institution % trusting ‘a lot’ or ‘a fair bit’

2002 2005

Insurance companies 24 20

Banks 29 34

Fed. government 38 30

Newspaper, TV 35,47 27,40

Law courts 50 50

Tax authority 63 46

Local police station 82 82

Local schools 83 79

Local hospitals 84 79

How is it being undermined? It hasn’t although it may be harder to “win” by being law abiding (Hypothesis).

Opportunities for investment and prosperity have been high for those who have been able to take advantage of Australia’s favourable economic conditions. Negative relationship to moral obligation.

Opportunities for tax minimization and avoidance have been available for those with wealth. Negative relationship to moral obligation.

Opportunities for those aspiring to home, family and a good job have been less easily accessed by segments of the population. Negative relationship to moral obligation.

Competitive Self

Imagine that you have to find a tax adviser. What would your ideal tax adviser be like? Would you give a top or high priority to some who is …

Moral Self - How is it being undermined?

Honest and offers a no fuss service

85% 82% 85%

Good at minimizing tax without taking risks

30% 26% 21%

Willing to be aggressive in reducing the tax bill

24% 20% 20%

Imagine you are caught for tax evasion – not declaring $5,000 in income or claiming work deductions unlawfully worth $5,000. How would you feel if you were caught ?

60% in 2000 and 60% in 2002 said they were likely or certain to feel ashamed or guilty

8% in 2000 and 8% in 2002 said they were likely to feel angry with the tax office and express that anger

7% in 2000 and 8% in 2002 said they would just shrug it off and not worry too much about it

92

73

55

6

13

72

57

7

10

92

74

57

5

11

94

0 20 40 60 80 100

Commitment

Capitulation

Resistance

Disengagement

Gameplaying

Percent agreement

Tax HEHF (L) 2005

Tax ATSFONS 2001

Tax CHFAS 2000

Percent endorsing each motivational posture to Australian Taxation Office 2000 - 2005