Tax Payer Behavior. Sjoerd Goslinga B/CKC - Unit Research & Marketing

Transcription

1 Tax Payer Behavior Sjoerd Goslinga B/CKC - Unit Research & Marketing

2 Context The general aim of the Dutch tax administration: To maintain and strengthen the willingness of citizens and firms to comply with their legal tax obligations. Compliance management: Which instruments and activities have to be used, and how, when and directed at whom, to positively influence tax compliance.

3 General research questions Which instruments and acitivities of the tax administration enhance tax compliance? Which factors determine tax compliance and tax non-compliance? Is it possible to influence these factors? Can the tax administration influence these factors? If so, how?

4 What do we need Knowledge of and insight in the motives and mechanisms underlying tax (non-)compliance Measurement of effect - criterion or indicator for tax (non-)compliance Knowledge of the relationships between enforcement activities, motives and behaviour

5 This presentation - What does the (scientific) literature tell us about compliance and (non-)compliance? - Results from a survey among SME s in The Netherlands - Conclusions and implications

6 Economic model of criminal behavior Gary S. Becker Compliance is the result of a cost - benefit calculation. People comply when the costs (the chance of getting caught and the severity of the consequences) are bigger than the benefits (non paid taxes).

7 Economic model of criminal behavior From this perspective enforcement is directed at: Increasing the (perceived) probability of detection chance of audits / controls chance of discovery of a trangression (quality of tax audits) Increase the chance and severity of fines or penalities Reduce the benefits of evasion

8 Campaigns/Influence: deterrence

9 Does economic deterrence work? Economic models do not explain reality very well More people pay taxes than the model would predict (Survey) research among taxpayers shows that the probability of detection and the severity of fines are not (always) related to tax compliance Deterrence can have opposite effects than intended affects intrinsic motivation negatively can lead to reactance and defiance

10 Defiance

11 Survey among Private Tax Payers Compliance attitude 6,5 6 5,5 5 4,5 Something is I give up I contribute taken from me something something Perceived detection probability small Perceived detection probability big

12 NORMS personal norms social norms - descriptive social norms (what others do) - prescriptive social norms (what others think) Robert B. Cialdini

13 Campaigns/Influence: social norms

14 Two types of compliance: - enforced compliance - voluntary compliance Two routes to compliance: - deterrence, use of power - norms, persuasion, internalization Two enforcement models: - repressive, command and control, cops and robbers - normative, service and clients

15 I. Ayres & J. Braithwaite (1992)

16 Legitimacy, justice and trust Distributive justice distribution of outcomes Procedural justice procedures/treatment Retributive justice appropriateness of sanctions

17 So... Different mechanisms and factors play a role in compliance This has consequences for the effectiveness and efficiency of monitoring and enforcement activities But... We should also be aware that the influence of enforcement on behaviour is limited

18 Environment - market characteristics Environment level - culture - self-regulation - et cetera Actor level Target group - knowledge - motives - opportunities Behaviour - compliance - non-compliance Policy level Legal constraints - rules - power/authority of enforcer Enforcement - strategy - instruments - intensity - style Policyeffect

19 Research among SMEs Objectives Development of an indicator or measure for (non-)compliance Gain insight in the experiences, opinions, attitudes of SME s with/about paying taxes, the tax office and the tax system Examine what factors determine tax (non-) compliance of SME s

20 Effects Effect-chain Tax office Input Output Tax payer Short-term Long-term Society Impact/Outcome

21 Compliance Survey SMEs Method Telephone survey among owners/managing directors of SME s (less than 50 employees) Response rate 40% Equally distributed among sectors and firm size Questionnaire Background characteristics of the firms and respondents Experiences with the tax office and paying taxes Opinions about the tax system, provision of services, opportunities to evade taxes, etc. Motives for (non-)compliance Indicators for (non-)compliance

22 (Non-) compliance intention Can you imagine a situation that would lead you to - Not keep your accounts/books according to the regulations? - Keep cash payments out of the records? - Enter too much or non-existent deductions in your tax return? - Not report all income in your tax return? - Employ people without paying the proper taxes? (certainly) neutral (certainly) not yes 57,4% 13,6% 28,9% 68,7% 6,5% 24,7% 75,5% 6,9% 17,6% 78,0% 5,2% 16,7% 78,0% 3,6% 18,4%

23 Opinion about services To what extent do you agree or (completely) neutral (completely) agree disagree disagree with the following statements? - The tax office is supportive enough 43,2% 27,8% 29,0% - In general the provision of services by the tax office falls short 37,4% 28,1% 34,4% - The tax office focusses on catching people rather than helping them 39,6% 30,4% 30,0%

24 Perceived treatment (completely) neutral (completely) To what extent do you agree or agree disagree disagree with the following statements? - The tax office treats everyone equally 43,2% 26,4% 30,4% - The tax office takes the situation of business entrepreneurs sufficiently into account 21,5% 25,4% 53,1% - Anyone who disagrees with the tax office has enough opportunities to explain one s point of view 45,6% 25,3% 29,0% - The tax office is too quick to fine tax payers 55,4% 21,4% 23,2%

25 Conclusion Owners/managing directors of SME s are critical about the services provided by the tax office and the treatment they receive from the tax office. Implications We have to learn more about the way SME s perceive paying taxes, and the treatment by the tax office.

26 Explanatory model Opinion about services Opportunities to comply Opportunities to evade taxes Distributive justice Procedural justice Trust in the tax office Personal norms/tax morale Social norms Deterrence (detection probability * sanction severity) Noncompliance intention

27 Results regressionanalysis Opinion about services Opportunities to comply Opportunities to evade taxes Distributive justice Procedural justice Trust in the tax office Personal norms/tax morale Social norms Deterrence (detection probability * sanction severity) Noncompliance intention

28 Survey Fraude in sight among SME s 3,0 2,46 Non-compliance intention 2,5 2,0 1,83 1,64 1,50 1,58 1,53 1,5 1,44 1,28 1,21 1,30 1,30 1,57 1,44 1,28 1,18 1,13 1,0 IN+ SN+ OPDE+ IN+ IN+ IN+ IN+ SN+ SN+ SN+ SNOP- OP+ OP+ OPDE- DE+ DE- DE+ IN+ IN+ IN+ IN- IN- IN- IN- IN- IN- IN- INSN- SN- SN- SN+ SN+ SN+ SN+ SN- SN- SN- SNOP- OP+ OP+ OP- OP- OP+ OP+ OP- OP- OP+ OP+ DE- DE+ DE- DE+ DE- DE+ DE- DE+ DE- DE+ DE

29 Conclusion Tax compliance among SME s is determined by: opportunities to evade taxes personal norms social norms economic deterrence Implications To positively influence tax compliance, the tax office should aim to: 1. reduce the opportunities to evade taxes 2. strengthen personal norms to comply 3. strengthen or activate social norms 4. increase deterrence Be aware of negative side-effects

30 Audits/controls Yes Control of tax return in the last 3 years 48,9 Visited by tax official in the last 3 years 51,1 30,2 0% 20% No 69,8 40% 60% 80% 100%

31 Effect of audits (1) 5 4,5 4 Mean 3,5 3 2,5 2 1,5 1 Perceived opportunities Perceived probability of for evasion detection Tax return not checked Non-compliance intention Tax return checked

32 Effect of audits (2) 5 4,5 4 Mean 3,5 3 2,5 2 1,5 1 Opinion on services Procedural justice Tax return not checked Trust Tax return checked

33 Effect of audits (3) 5 4,5 4 Mean 3,5 3 2,5 2 1,5 1 Perceived opportunities Perceived probability of for evasion detection No visit tax official Non-compliance intention Visit tax official