Resistant and Dismissive Defiance in Taxation: A Challenge beyond Compliance

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• Resistant and Dismissive Defiance in Taxation A
  Challenge beyond Compliance
• Valerie Braithwaite
• Regulatory Institutions Network
• Australian National University
• OECD/FTA Conference Influencing Taxpayers
  Compliance Behaviour
• 28-29 September 2009, The Hague, The Netherlands

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Three Objectives
Understanding pathways to defiance Observing
the glass - both half full and half
empty Reflecting on three models of community
engagement central to Centre for Tax System
Integrity research
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Defiance
is a signal that individuals express
attitudinally or behaviourally toward an
authority (and shared with others) that
communicates unwillingness to follow the
authoritys prescribed path without question or
protest. Any of us can experience, indeed
practice defiance if the circumstances are right.
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Motivational Postures
are sets of beliefs and attitudes that sum up how
individuals feel about and wish to position
themselves in relation to another social entity,
in this case a tax authority. Motivational
postures send social signals or messages to the
authority about how that authority is regarded.
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The Central Ideas of Threat Agency
and Social Distance
Authority threatens everyone, by virtue of being
an authority. As an authoritys threat
increases, taxpayers use their motivational
postures to adjust their social distance and
establish a comfort zone for themselves in
relation to the authority. Different contexts
bring to the fore different postures, and
different postures direct individuals to make
different responses, some obliging and
deferential, others adversarial and dismissive.
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Five motivational postures
Commitment Capitulation Resistance Disengagemen
t Game playing
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How Do We Measure Socially Proximal Postures?
Commitment (alpha reliability coefficient .82 homogeneity ratio .43) Paying tax is the right thing to do. Paying tax is a responsibility that should be willingly accepted by all Australians. I feel a moral obligation to pay my tax. Paying my tax ultimately advantages everyone. I think of tax paying as helping the government do worthwhile things. Overall, I pay my tax with good will. I resent paying tax. (reversed) I accept responsibility for paying my fair share of tax.
Note Respondents were asked to rate each
statement on a five-point scale from strongly
disagree (1) to strongly agree (5).
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How Do We Measure Socially Proximal Postures?
Capitulation (alpha reliability coefficient .63 homogeneity ratio .27) No matter how cooperative or uncooperative the Tax Office is, the best policy is to always be cooperative with them If you cooperate with the Tax Office, they are likely to be cooperative with you. Even if the Tax office finds that I am doing something wrong, they will respect me in the long run as long as I admit my mistakes. The Tax Office is encouraging to those who have difficulty meeting their obligations through no fault of their own. The tax system may not be perfect, but it works well enough for most of us.
Note Respondents were asked to rate each
statement on a five-point scale from strongly
disagree (1) to strongly agree (5).
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How Do We Measure Socially Distal Postures?
Resistance (alpha reliability coefficient .68 homogeneity ratio .31) As a society, we need more people willing to take a stand against the Tax Office. Its important not to let the Tax Office push you around. The Tax Office is more interested in catching you for doing the wrong thing, than helping you do the right thing. It's impossible to satisfy the Tax Office completely. Once the Tax Office has you branded as a non-compliant taxpayer, they will never change their mind. If you don't cooperate with the Tax Office, they will get tough with you.
Note Respondents were asked to rate each
statement on a five-point scale from strongly
disagree (1) to strongly agree (5).
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How Do We Measure Socially Distal Postures?
Disengagement (alpha reliability coefficient .64 homogeneity ratio .27) I don't really know what the Tax Office expects of me and I'm not about to ask. I don't care if I am not doing the right thing by the Tax Office. If I find out that I am not doing what the Tax Office wants, Im not going to lose any sleep over it. I personally dont think that there is much the Tax Office can do to me to make me pay tax if I dont want to. If the Tax Office gets tough with me, I will become uncooperative with them.
Note Respondents were asked to rate each
statement on a five-point scale from strongly
disagree (1) to strongly agree (5).
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How Do We Measure Socially Distal Postures?
Game playing (alpha reliability coefficient .69 homogeneity ratio .32) I enjoy talking to friends about loopholes in the tax system. I like the game of finding the grey area of tax law. I enjoy the challenge of minimizing the tax I have to pay. I enjoy spending time working out how changes in the tax system will affect me. The Tax Office respects taxpayers who can give them a run for their money.
Note Respondents were asked to rate each
statement on a five-point scale from strongly
disagree (1) to strongly agree (5).
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Centre for Tax System Integrity
6 tax focused national mail surveys between 1999
and 2005 3 national mail surveys on governance
between 2000 and 2005 3 of the tax focused
surveys tracked Australians responses to tax
reform and the introduction of the goods and
services tax (GST) in July 2001
2000 CHFAS survey pre-GST 2001 ATFONS survey
immediately post-GST 2005 HEHF survey post the
reform process
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From Postures to Defiance
A factor analysis of the postures produced two dimensions that represented two kinds of defiance One was critical, but accepting of the system Resistance The other was cynical and rejecting of the system Dismissiveness
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Dimension 1 Resistant Defiance
The posture of resistance defined one end of the dimension, commitment and capitulation defined the opposite end. High scorers were those who complained of the authority abusing its power. Low scorers believed they should stay on the right side of the authority and keep the authority happy in some cases, even showing commitment toward the tax system.
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Dimension 2 Dismissive Defiance
The postures of disengagement and game playing defined one end of the dimension. No postures defined the other end, although in principle commitment to some kind of tax system would be expected to anchor this end. High scorers were those who have no time for tax authorities, no respect for what they stand for or could stand for.
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Two Types, Two Purposes
Resistance The purpose is to change the course
of action that the authority is taking but not
destroy the authority itself. I dont like the
way you are doing this and I want you to change,
but I dont dispute that we need an authority to
regulate us in this area
Dismissiveness The purpose is to disable the
authority, to prevent the authority from
intervening in this aspect of life You have no
business telling me what to do no-one should
have the authority that you have over me
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Disillusionment with Democracy
Values (seeking status, harmony)
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Disillusionment with Democracy
Values (seeking status, harmony)
Coping Styles (thinking morally, feeling
oppressed)
Perceived Deterrence
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Disillusionment with Democracy
Values (seeking status, harmony)
Social Modelling (bending rules, winning, aggressi
ve or honest adviser)
Coping Styles (thinking morally, feeling
oppressed)
Perceived Deterrence
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Disillusionment with Democracy
Values (seeking status, harmony)
Social Modelling (bending rules, winning, aggressi
ve or honest adviser)
Coping Styles (thinking morally, feeling
oppressed)
Defiance (resistance, dismissiveness)
Perceived Deterrence
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Perceived Institutional Integrity
Disillusionment with Democracy
Trust
Values (seeking status, harmony)
Social Modelling (bending rules, winning, aggressi
ve or honest adviser)
Coping Styles (thinking morally, feeling
oppressed)
Defiance (resistance, dismissiveness)
Perceived Deterrence
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Resistant defiance is
A battle between pathways of moral obligation and
of grievance. Moral obligation or the belief
that the law should be obeyed reins in a persons
defiance. Grievance or the belief that
government has broken its contract with citizens
fuels defiance.
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Disillusionment
.51
-.49
Resistance
Integrity
-.66
.29
Feeling Oppressed
A composite structural equation model predicting
resistance
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.17
Honest Adviser
Disillusionment
-.35
.14
Thinking Morally
-.17
.51
.18
.33
-.49
Resistance
Integrity
.18
-.66
.22
.29
Perceived Deterrence
R2.58
Feeling Oppressed
.23
A composite structural equation model predicting
resistance
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What is our best model of resistant defiance?
Resistance is about grievance. Grievance involves more than the tax system, it includes the democracy itself. Constraining grievance is a morally obligated pathway. Are there opportunities for managing resistant defiance? Yes, around perceived deterrence, perceived tax system integrity and disillusionment with the democracy with different consequences.
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Impact on Governance Resistance
Resistant defiance is noisy and time consuming but does not necessarily lead to law breaking. Reducing resistant defiance means authorities have to improve their institutional integrity. Individual agencies can improve their institutional integrity, but importantly government needs to lead by example.
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Dismissive Defiance is
A battle between pathways of moral obligation and of status seeking. Moral obligation or the belief that one shouldnt bend the rules to get ahead reins in a persons defiance. Status seeking and competitiveness involving going around the state and finding new alternative authorities fuels dismissive defiance.
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Disillusionment
-.40
.52
Dismissiveness
.27
.42
Feeling Oppressed
Aggressive Adviser
.57
Seeking Status
.30
Composite structural equation model predicting
dismissiveness
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-.35
Disillusionment
Honest Adviser
.17
Thinking Morally
-.40
.52
-.40
-.18
.19
Perceived Deterrence
-.15
Dismissiveness
.18
.27
.42
Feeling Oppressed
Aggressive Adviser
.57
Seeking Status
.30
R2.50
Composite structural equation model predicting
dismissiveness
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What is our best model of dismissive defiance?
Dismissiveness is less about grievance and more about freedom from authority. We see a competitive pathway that leads to the alternative authority of the aggressive tax planning industry. Grievance fuels the competitive pathway involving alternative authorities, as does the desire for status and being a winner. Constraining the grievance-competitive pathway is a morally obligated pathway. Are there opportunities for managing dismissive defiance? Yes, around perceived deterrence, disillusionment with the democracy and alternative authorities with different consequences.
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Impact on Governance Dismissive Defiance
Dismissive defiance involves competition to beat the system it is strategic, non-responsive to integrity interventions and leads to law breaking. Dismissive defiance threatens government authorities and can become organized around alternative authorities with its own ideology and resolve to defeat the system. Agencies can improve their institutional integrity, but this may not contain dismissive defiance. Power sharing may be the only option for dismissive defiance.
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Theoretical propositions Defiance in Taxation
and Governance (Braithwaite, 2009)
Authority threatens us all. In the process of
dealing with authority, three selves go forward
to face the enemy
a moral self a status seeking self a democratic
collective self.
Conclusion Tax reform in its outcomes and
process needs to be respectful of these selves.
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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.
I am a good person and the authority should
recognize this.
When a moral self is under-valued
The morally obligated pathway is weakened, and
the way is cleared for defiance.
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A status seeking self a self that aspires to
wealth, power and status in some cases and to a
job, family and home in others.
I have hopes of success and authority should not
block my path.
When a status seeking self cant be expressed
within the authoritys domain
A competitive pathway to defiance comes into
being, strengthened by alternative authorities
that provide resources to defeat the government
agenda.
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Democratic collective self a self that expects
government to deliver in exchange for our
cooperation, an expectation of being respected as
a citizen.
I am a good citizen and the authority should
treat me and other citizens as valued
participants of the democracy.
When a democratic collective self is betrayed
A grievance pathway to defiance comes into being
that is shared with others and expressed as
protest against authority.
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What do tax agencies have going for them
The Glass Half Full What do tax agencies
have going against them The Glass Half
Empty The process of learning a new way forward
See Both Realities
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Glass Half Full
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Snapshot Statistics of what Australians Think
How many Australians feel a moral obligation to
pay tax 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
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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
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How is the moral self undermined? 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
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
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Glass Half Empty
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Snapshot Statistics of what Australians Think
How many Australians feel oppressed by taxation
agreeing with the following in 2000, 2002 and
2005?
I would be better off if I worked less given the rate at which I am taxed 31 29 26 Paying tax means I just cant get ahead 28 29 29 Paying tax removes the incentive to earn more income 56 49 48
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How is the status seeking self undermined?
Pathways to success are more easily accessed by
some than others
Opportunities for investment and prosperity
Opportunities for tax minimization and avoidance
Opportunities for home, family and job.
Correlational analyses show that those who seek
these opportunities most strongly express weaker
moral obligation.
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5
Unskilled factory workers
6
9
Farm labourers
9
11
Waitresses
10
24
Trades people
22
23
Small business owners
24
29
Farm owners
29
Tax ATSFONS
Tax CHFAS
47
Tax agents and advisors
45
49
Doctors in general practice
51
60
Surgeons
59
73
Senior judges and barristers
64
75
Owner managers
70
78
Chief executives
77
0
10
20
30
40
50
60
70
80
90
Percent paying a bit less or much less than their
fair share
Perceptions of the degree to which different
occupational groups are paying their fair share
of tax
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Reform action of utmost importance 2000
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
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Freemarket
38
40
85
Tax HFHE (L) 2005
Disillusionment
87
Hope 2003
Tax CHFAS 2000
86
0
20
40
60
80
100
Percent agree or strongly agree
A comparison of levels of disillusionment with
Australian democracy and support for small
government and free markets 2000 - 2005
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Snapshot Statistics of what Australians Think
How many Australians agree or say yes in 2000,
2002, and 2005 to questions on value for money?
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
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12
Game playing
11
9
Disengagement
8
50
Resistance
55
70
Capitulation
62
82
Hope
Commitment
Democracy
84
0
20
40
60
80
100
Percent agreement
Percent endorsing each motivational posture to
federal government
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What are the big ideas that we tested?
To make the link with policy and practice let us
ground the findings in three models of community
engagement practical tools that come out of
theory driven and empirically tested
research (a) Taxpayers Charter (b) ATO
Compliance Model (c) Wheel of Social Alignments
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Taxpayers Charter
Content Transparency in quality decision-making
and respectful treatment of taxpayers Idea
Procedural justice ? Increases legitimacy of
rules and law, cooperation with authority and
compliance Obtaining favourable decisions or
outcomes is far less important to individuals
than experiencing procedural fairness Procedural
fairness means impartiality in decisions,
consistency in decisions, being treated with
respect Reference Tyler, Tom (2008) Psychology
and Institutional Design, Review of Law and
Economics 4 (3) 801-887.
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The ATO Compliance Model
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Responsive Regulatory Pyramids
Enforcement pyramid Strengths-based
pyramid Ayres, Ian and Braithwaite John (1992)
Responsive Regulation Transcending the
Deregulation Debate Oxford Oxford University
Press. Braithwaite, John, Makkai, Toni, and
Braithwaite, Valerie (2007) Regulating Aged Care
Ritualism and the New Pyramid Cheltenham Edward
Elgar.
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The Wheel of Social Alignments
Braithwaite, Valerie (2009) Tax evasion In M.
Tonry, Handbook on Crime and Public Policy
Oxford Oxford University Press
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Implications for Governance
Culture of respect Strazdins (2000) concept of emotional work (help, share/empathize, regulate) Institutional integrity a meaningful and valued purpose achieved with justice (procedural and distributive) Authentic, open and accountable deliberation opportunity to show benefits, to acknowledge and diligently monitor risks Appreciation of cooperation
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Additional Institutional Arrangements
Restorative Justice? Deliberative Democracy? Both Enable Values-based Dialogue
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Conclusions
Advertising is beguiling but no one authority is its master Be clear about benefits, ensure justice issues are addressed ASAP, and do a moral obligation litmus test as policies are being developed and as they are implemented Command and control thinking about the implementation of policy is likely to add extraordinary expense incurred through costs of surveillance and deterrence Deterrence is a necessary part of regulation but it must be credible, enforceable and fair Education and persuasion are useful vehicles for establishing the integrity of authorities as new policies are introduced and implemented Fairness in processes and procedures can be established and corrected during the education and persuasion process setting the scene for high standards of procedural justice
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