Incentivising tax evasion in small business

1
Incentivising tax evasion in small business
Team Valerie Braithwaite, Eliza Ahmed, Monika
Reinhart and Julie Ashby
2
Question
What does it mean to have a voluntary taxpaying
culture in the small business context?
3
A model of self-regulation
Ability
Willingness
Pathways
Similar to the models that regulators use to
improve compliance Kagan Scholz, Mitchell,
the ATOs Easier, Cheaper and more Personalized
program
4
Our goal is to understand
Willingness
or
Commitment to Honest Taxpaying
5
Three studies asking three questions
How does commitment to honest taxpaying compare
with capacity in predicting tax evasion? What
does honest taxpaying mean to small business
owners? What factors promote and what factors
undermine commitment to honest taxpaying?
Study 1
Study 2
Study 3
6
Data bases Study 1 Quantitative Community
Hopes, Fears and Actions Survey (CHFAS) 244 small
business owners or self-employed individuals from
a random national sample of 2040 citizens Study
2 Qualitative Australian Tax System Fair Or
Not Survey (ATSFONS) 260 small business owners or
self-employed individuals from a random national
sample of 2374 citizens Study 3
Quantitative Australian Tax System Fair Or Not
Survey (ATSFONS) 302 small business owners or
self-employed individuals from a random national
sample of 2374 citizens
7
Study 1 Predicting tax evasion
p lt .05 p lt .01 p lt .001
8

• Study 2
• In your own words, what do you expect the tax
  office to deliver to you?
• In your own words, what do you expect the tax
  office to deliver to the Australian community?
• In your own words, what is your responsibility to
  the tax office?

Finally, if you have any comments that you would
like to add, please write them below.
9
Study 2 Themes Honesty and being law abiding
(propriety) My responsibility is to be honest
to accept and live within laws laid down by
government if I disagree, then use legal options
available as a taxpayer and vote to have the law
changed. Obedience I am obliged to pay
whatever is decided or legislated Taxation -
yes, representation -no. There was a revolution
over this 200 years ago in America. A similar
thing got crushed at Eureka Stockade. History
repeats we wish.
10
Study 2 Themes (continued) The fairness slide
To pay what is due and fair.
To contribute a reasonable proportion of
earnings without jeopardising our standard of
living.
To provide them with our tax return that is as
honest as we can get it while bearing in mind
that we also do small cash jobs that we dont
declare.

11
Study 2 Themes (continued) The struggle to make
good
Financially I have no future. I want a tax
system where you dont get penalized for honesty
and hard work. Why a corporation/large tax
defaulter is negotiated with, while a lower
income earner is sent to the wall is beyond me.
12
Study 2 Themes (continued) Reform
A better tax system that respects hard working
taxpayers and rewards those people in a way that
stops them from feeling that they are working
only to pay tax. It seems to me that if you
wish to work longer hours you are penalised for
this by paying excessive taxes. Give us more
incentive to earn larger salaries and to spend
money that will create more jobs.
13
Study 2 Themes (continued) Lack of
even-handedness in the system Distancing from
the wealthy
There are obviously too many loopholes in the
present system, meaning a significant percentage
of unscrupulous companies and individuals are not
contributing. Why companies, executives,
politicians have more tax/financial advantages
than your average blue collar worker has
angered and confused me for years. People who
earn larger incomes are the only people to obtain
expensive accounting which minimises greatly
their obligations - Mr and Mrs Average and small
business carry more than their share.
14
Study 2 Themes (continued) Lack of
even-handedness in the system Distancing from
the poor The backbone and the main provider of
tax levies is from the middle bracket, however
there is no opportunity or reward received the
bludgers get 14,000 grants when we all have to
struggle to pay our mortgages and 50 tax. We
need more fairness towards hardworking
Australians as opposed to those who could not be
bothered to work. And politicians While
politicians continue to exploit loopholes and
enjoy tax free perks, we will never have an
equitable system for all Australians.
15
Study 2 Themes (continued) Virtue in paying,
virtue in enforcing
I expect them to do their job, get through their
work and do it correctly, and show no favours to
high flyers and other high profile people. I
expect them to be honest to the Australian people
who pay their wages. Apprehend tax cheats,
particularly companies or corporations and high
salary earners who use the system to avoid
legitimate tax obligations. Tax avoidance was
seen to be a widespread problem The rich are
getting richer and the poor pay more tax.
16
Study 2 Themes (continued) The protection of a
tax adviser My responsibility is to get on
with our own business and engage an honest and
reputable accountant. I accept my yearly tax
returns as supplied by my accountant to be true
to the best of my honest ability. I place my
trust in my accountant mistakes still come back
to me!
17
Study 2 Themes (continued) Discontent with
treatment from the tax office
I expect the tax office to treat me justly and
with respect. They are public servants not
government overlords. Treat me as an honest
person and not a criminal who has yet to be
caught. I would like them to adopt a more
human face and not act like an untouchable
institution. A more extreme respondent vented
his wrath in this way The tax office is
almost as bad as the Taliban.
18
Study 2 Themes (continued) A sense of
hopelessness
Taxation, a very necessary evil, should not be,
in this country, such a messy, unfair burden on
the small and innocent citizen. However, while
the rich and influential are pandered to, there
is not much hope of a decent reform. We know
that the tax system favours the wealthy and will
probably never be fair to the lower income
earner.
19
Variables extracted from Study 2 Justice -
paying more than my fair share compared with
other Australians - interpersonal and procedural
justice respect, consult, trust - belief in
trust norms hope for the future Socially
integrative aspirations and actions - humility
- social integration Perceived
deterrence Bypass routes - shame
displacement - dissociation Variables from
Study 1 Commitment to honest taxpaying Ideal
honest, no-fuss adviserTax evasion
20
(No Transcript)
21
Conclusions

• Commitment to honesty is important.
• Pathways to honesty are important.
• Deterrence reinforces honesty.
• Injustice will break down honesty.
• The types of injustice that are important in this
  context are believing that you are paying more
  tax than others and you are not being treated
  respectfully and inclusively.

22
Questions

• What is the role of socially integrative
  aspirations and actions ?
• How does the moral bypass work ?
• What kinds of justice are important in what kinds
  of situations ?