Tax Compliance

11 Key excerpts on "Tax Compliance"

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  Taxes and Taxation Trends

  • Jolanta Iwin-Garzy?ska(Author)
  • 2018(Publication Date)
  • IntechOpen

    (Publisher)

  For the government, tax income operations are heavily dependent on Tax Compliance, while the fairness of the allocation of tax burden affects the tax payers ’ compliance. The situation has been studied here by dealing with university students in regard to whether or not a perception of Tax Compliance develops in a highly educated people who are not tax payers yet, and to what degree. With this intention, a questionnaire related to the factors that affect the Tax Compliance was implemented on a sample group that includes people with similar characteristics involving the level of education, department of study, and age. 1.1. The concept of Tax Compliance As stated by James and Alley, Tax Compliance was defined “ in terms of the degree to which taxpayers comply with the tax law ” [1]. Tax Compliance is the tax payers ’ compliance with tax laws and regulations, while the concept assumes willingness of the tax payers to comply with their liabilities without being inspected, prosecuted, and without a need for a threat or a sanction [2]. The concepts of tax ethics and tax consciousness are hidden in this definition. Tax consciousness is defined as a necessary fact that helps to know the extent to which changes in people ’ s tax burden will affect their behavior [3]. Besides that, tax moral is also defined as “ taxpayers ’ intrinsic motivation to pay taxes ” in [4]. Higher the tax consciousness happens, higher the tax morality becomes. As long as the tax consciousness occurs and increases, tax moral will increase and a perception of Tax Compliance will develop ( Figure 1 ). The Tax Compliance shaped by tax consciousness and tax ethics should be completed by the stages of taxing in terms of the tax payer. The content of Tax Compliance is described in four parts [5]: • Complete declaration of the income to be taxed • Accurate representation of the factors to be discounted from the tax • Submitting the declaration on time • Calculating the tax liability correctly.

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  Comparative Taxation

  Why tax systems differ

  • Chris Evans, John Hasseldine, Andy Lymer, Robert Ricketts, Cedric Sandford(Authors)
  • 2017(Publication Date)
  • Fiscal Publications

    (Publisher)

  11 Tax Compliance 11.1 Introduction and scope In this chapter we look at the extent to which taxpayers – both business and personal – are willing and able to comply with the taxes imposed by their governments. The topic of Tax Compliance covers a large area and includes consideration of the tax gap – the gap between what revenue authorities would collect if everyone paid the tax legally due and what is actually collected – as well as concepts such as tax evasion, tax avoidance and tax planning. While a lot of attention is inevitably paid to those taxpayers who do not comply with their tax obligations, it must be stressed at the outset that overall compliance with tax obligations is surprisingly high in most developed countries (though the situation is not always so good in developing countries). For example, for the 2014-15 tax year, the UK revenue authority estimated that over 92% of tax liabilities were collected (HMRC, 2016, p. 3). Nevertheless, an unacceptably large amount of the tax that should be paid every year is not, such that compliant taxpayers bear a disproportionate share of the revenue burden, and giving rise to the “tax gap”. Reliable data about the tax gap, tax avoidance and tax evasion is often lacking and it is difficult to try to make direct international comparisons. But some can be made. And in addition we can explore administrative, economic and social-psychological approaches to the problem of Tax Compliance with a view to framing policies which offer prospects of success in reducing tax evasion and avoidance.

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  Tax Compliance and Risk Management

  Perspectives from Central and Eastern Europe

  • Piotr Karwat, Katarzyna Kimla-Walenda, Aleksander Werner(Authors)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  Grądalski, 2004 ). This last postulate will, of course, be disputed in contemporary studies of taxation, especially from the point of view of the postulates of welfare economics. These studies, however, seem to have somewhat less influence on concepts concerning the compliance phenomenon. Of course, the idea of acting in accordance with the law undoubtedly has economic references related to reducing transaction costs in taxation (tax collection and control of compliance of taxpayers’ behaviour with the law). In sum, it seems more important for public policy to build a legal culture in the context of motivation to act in accordance with the law, aimed at strengthening the elements of civil society, resulting from mutually loyal patterns of behaviour within the framework of the law in force. Thus, they have both economic and broader references related to the legitimacy of power in civil society.

  Within the framework of research on the phenomenon of compliance, there is a strong desire to look for those among the mechanisms of the phenomenon that can be easily identified, while their relationship to taxpayers’ behaviour is unambiguously defined. These phenomena are related to mechanisms based on coercion, creating threats to taxpayers in the form of negative payouts in the case of identifying illegal behaviour. The mechanisms in question are part of the economic deterrence approach. Broader behavioural approaches will encompass the entire spectrum of factors of a psychological nature both social and fiscal (Devos, 2014a ). At the same time, and this is worth remembering, the problem remains the unambiguous, non-contentious identification of the rationale for fitting into the above models (Devos, 2014b ; Étienne & Wendeln, 2010

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  The Routledge Handbook of Accounting Ethics

  • Eileen Z. Taylor, Paul F. Williams, Eileen Z. Taylor, Paul F. Williams(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Tax avoidance is different from noncompliance. Tax avoidance is using every legal means available – such as tax planning over time and over different jurisdictions – to minimize legitimate taxes owed to the tax authority. Tax avoidance is not considered to be illegal and usually is not considered to be unethical. An example of tax avoidance that generally is considered ethical is to claim deductions that are allowed by the tax authority, which would include tax deductions for dependents or for mortgage interest paid. However, not all tax avoidance is perceived to be ethical. For example, the use of offshore tax havens, while legally permitted, may be perceived as unethical, for at least two reasons. One is that only wealthy individuals have the means to hire tax professionals with expert knowledge to navigate something as complex as tax havens. The other is that the use of offshore tax havens runs afoul of the principle of paying one’s fair share. Thus, while tax avoidance is not illegal, it is not always ethical.

  Tax Compliance is also associated with the detectability of noncompliance. In cases where a third party is responsible for providing tax information to the tax authority, a detection of noncompliant tax reporting is heightened. For example, income or deductions that are subject to third-party verification, such as a salary from an employer or an employee’s pension contribution, tend not to result in noncompliance, since tax authorities easily can match what the employee reported on their tax return to the amount on the tax records the employer provided to the employee and the tax authority. By contrast, income and deductions not directly associated with third-party reporting procedures have more latitude for tax noncompliance. For instance, employment or business activities where cash is exchanged and other transactions that are difficult to trace or verify are more likely to result in noncompliance.

  The literature about Tax Compliance is considerable. Relatively recent literature reviews include Devos (2014), Kirchler and Hoelzl (2018), James and Edwards (2010), Kirchler et al. (2010), and Kornhauser (2007).2

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  Behavioural Public Finance

  Individuals, Society, and the State

  • M. Mustafa Erdoğdu, Larissa Batrancea, Savaş Çevik, Larissa Batrancea, M. Mustafa Erdoğdu, Savaş Çevik(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  Tax evasion costs governments $3.1 trillion annually, report says. The New York Times . Retrieved August 1, 2018, from www.nytimes.com/2011/11/ 26/business/global/26iht-tax26.html. Zhang, N., Andrighetto, G., Ottone, S., Ponzano, F., & Steinmo, S. (2016). “Willing to pay?”Tax Compliance in Britain and Italy: An experimental analysis. PloS One , 11 (2), e0150277. 11 Tax Compliance theories and fiduciary taxes Do the shoes fit? Elaine Doyle, Brian Keegan, and Eoin Reeves Introduction Theories focused on Tax Compliance fall broadly into two distinct categories; those emphasising rational economic behaviour by assuming that tax com-pliance decisions are taken to maximise outcomes for the taxpayer, and those which also recognise the moral, psychological, and social factors influencing Tax Compliance (Kornhauser, 2007; McKerchar & Evans, 2009). The link between both sets of theories is a focus on individual taxpayers and their relationship with the relevant revenue authority (James, 2012). That relationship is usually framed either in terms of the taxpayer’s assessment of the capacity of the rev-enue authority to detect and penalise tax default, or in terms of respect for the revenue authority and the fairness of their approach along with social norms and trust in how the authorities deal with people and how the system is run (Likhovski, 2007; Rawlings, 2004). While undoubtedly shedding light on how some compliance decisions are made, this focus may obscure other important factors within tax systems of modern economies where fiduciary taxes paid on behalf of individual taxpayers make up a significant majority of the tax take.The two main taxes paid by individuals – income tax and value added tax (VAT) (or goods and services tax, depending on the jurisdiction) – are typically incurred by individual taxpayers as workers or consumers without necessarily having any direct contact with the revenue authority.

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  Global Perspectives on E-Commerce Taxation Law

  • Subhajit Basu(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  5 However, this is not a book about the economics of taxation. That subject is a study in itself. Still, we should understand something about the economic logic of choice that undergirds the selection of taxes.

  4.1.1 Why Do We Tax the Way We Do?

  A government that cannot tax cannot survive. Taxation has always been a mechanism for the stabilization and regulation of the economy. In a modern economy, governments must achieve two primary goals, which are controversial but which also have been widely employed by the states. They must provide public goods and services demanded by the population and they must find ways to implement changes in the distribution of income that is generated by market forces if such changes are desired by the collective.6 This, in turn, must be financed through taxation. However, because taxation inevitably impinges on most aspects of economic activity, careful consideration must be given to its design. This requires design of a tax system in the most efficient and equitable way possible. Setting up an efficient and fair tax system is, however, far from simple. Tax scholars use criteria of ‘efficiency’ and ‘equity’ in order to evaluate the appropriateness of a particular tax policy choice.7 Efficiency concerns include the desired neutral tax treatment of comprehensive forms of economic activity in order to avoid welfare-reducing market distortions, ease of tax administration in order to promote tax collection and low compliance costs for businesses in order to ensure that economic activity is not unduly discouraged. Equity concerns involve considerations such as fairness among similarly situated individuals (horizontal equity) and fairness among individuals with different economic circumstances (vertical equity). Taxation also has a regulatory component; it can be used to steer private sector activity in the directions desired by governments. This function is also controversial, as shown by the debate surrounding tax expenditures.8

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  Taxpayer Compliance, Volume 1

  An Agenda for Research

  • Jeffrey A. Roth, John T. Scholz, Ann Dryden Witte, Jeffrey A. Roth, John T. Scholz, Ann Dryden Witte(Authors)
  • 2016(Publication Date)
  • University of Pennsylvania Press Anniversary Collection

    (Publisher)

  2. Understanding Taxpayer Compliance: Self-Interest, Social Commitment, and Other Influences Summary of Existing Research Findings Social scientists from a variety of disciplines have sought to discover, through theoretical and empirical research, why people comply or fail to comply with federal income tax reporting requirements. The research sug-gests that considerations of both self-interest—including both financial incentives and social sanctions—and moral commitment affect levels of compliance. And empirical research has revealed certain demographic and socioeconomic compliance patterns that may be interpretable in terms of self-interest and moral commitment. Much more work is needed to quan-tify the magnitudes of these relationships, to measure the compliance effects of IRS activities, and to understand how taxpayers form their perceptions of the risks and rewards of noncompliance and their personal values concerning compliance. FINANCIAL SELF-INTEREST Simple economic theory predicts that compliance increases as the de-tection of noncompliance becomes more probable. Consistent with this prediction, there is strong evidence that income from sources that are more visible to the IRS is more likely to be fully reported. Visibility is enhanced by withholding, by information reporting by third parties such as banks, and by other records. Evidence also suggests that experiencing an audit may slighdy increase future compliance, at least if the audit discovers all noncompliance and the taxpayer feels the outcome is fair. But even that conclusion is based on old data, and individual-level data over time on IRS contacts, changed per-ceptions, and compliance would be needed to reach more definitive conclu- 72 Understanding Taxpayer Compliance sions. In addition, little is known about the actual detection probabilities for different forms of noncompliance and about how taxpayers form per-ceptions of these probabilities.

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  Tax Cheating

  Illegal--But Is It Immoral?

  • Donald Morris(Author)
  • 2012(Publication Date)
  • Excelsior Editions

    (Publisher)

  EIGHT COMPLIANCE, COMPLEXITY, CONSCIENCE, AND FAIRNESS

  The whole practice of public finance has been developed in an endeavor to outwit the taxpayer and to induce him to pay more than he is aware of, and to make him agree to expenditure in the belief that somebody else will be made to pay for it.

  —Friedrich Hayek (1899–1992), Law, Legislation, and Liberty

  The Moral Dimension of Tax Compliance

  From a public policy perspective, if compliance with the income tax laws is a growing problem, it is important to consider all the tools available for promoting obedience to the law. A number of such measures have been suggested and debated. They include (1) increasing the perceived fairness of the tax system,1 (2) increasing the audit rate,2 (3) decreasing the perception that the government is wasting tax dollars,3 (4) reducing privacy restrictions and thereby exposing more taxpayers to the stigma of tax cheater,4 (5) simplifying the law and increasing taxpayers' understanding of their legal obligations,5 (6) improving the deterrence effects of tax penalties,6 (7) reducing the perception that most people cheat,7 (8) reducing negative perceptions of the IRS,8 (9) increasing trust in the government,9 (10) reducing the tax rates,10 (11) increasing the tax rates,11 (12) increasing efficiency of Tax Compliance by reducing expenditure of time and money,12 (13) reducing opportunity for cheating by increasing third-party reporting,13 (14) rewarding taxpayers for compliance,14 (15) increasing individuals' feelings of guilt about tax cheating through promoting moral commitment to the law,15 and (16) positively affecting moral beliefs about tax cheating by, for example, appealing to conscience.16

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  Economics for a Civilized Society

  • Greg Davidson, Paul Davidson(Authors)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  These facts suggest that continuously cutting taxes on a massive scale is not a viable way to slow the national decline in voluntary Tax Compliance. If we are trying to buy our way to Tax Compliance through low tax rates, evidence suggests we are paying too much for what we receive.

  The conservative position is that people will not comply with tax laws unless the price is right. People must be rewarded individually to obey the law. Acceptance of this philosophy sends a signal to taxpayers that will directly influence their civic values. If the process of weighing individual costs and benefits of Tax Compliance is given legitimacy by community leaders espousing conservative philosophy, then a damaging blow is struck against civic values involving taxpayers’ duties and social responsibilities which will reverberate for years to come. The civic spirit of a democratic tax system can be vitiated by allowing noncompliance to proliferate unheeded, and by excusing its growth by claiming tax rates are so high that self-interested members of society have reason to avoid taxes. The result will be to steadily erode the credibility upon which the remaining voluntary compliance of the system is based.

  NONCOMPLIANCE: HISTORY AND THE SEARCH FOR CAUSES

  When Ronald Reagan was elected President, Tax Compliance at the federal and state levels had been falling for 15 years. The IRS reported that between 1973 and 1981 the amount of annual revenue lost as the result of noncompliance with federal tax law increased by 58 per cent (after adjustment for inflation). According to the conservative estimate of the IRS, $90 billion in revenue was lost in 1982 alone. That enormous sum of money exceeds the amount that the federal government spent that year on Justice, Education, Commerce, the State Department, Housing and Urban Development, Transportation, the Environmental Protection Agency, NASA, and the operations of the House and Senate, the Federal Judiciary, and the White House, all combined.

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  Taxing Democracy

  Understanding Tax Avoidance and Evasion

  • Valerie Braithwaite(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  As important as these are to an effectively functioning tax system, compliance problems are not always black and white in the field of taxation, and in such circumstances, it is helpful for the tax office to have a range of tools at their disposal to manage the compliance problem well. Possible courses of action that tax officials can take are depicted within the framework of the Compliance Model in Figure 1.1 (middle column). They are arranged to represent different levels of seriousness and intrusiveness on the part of the tax office, the general thesis being that if taxpayers are prepared to meet their obligations with minimum interference by the tax office, they should be left alone to get on with it. Needless to say, the courses of action will change as the nature of the compliance problem changes: What is useful for cash economy problems will not necessarily apply to other problems (see Chapter 9). While local areas need to develop their own compliance strategies (Sparrow, 2000), the principles that guide enforcement are more stable and are represented on the right hand side of the Compliance Model in Figure 1.1. For those who are willing to cooperate, the principle guiding the choice of strategy is self-regulation. If taxpayers are committed to correcting their own mistakes, they should be encouraged and assisted in doing so. The next level of interference might be called enforced self-regulation. Taxpayers have responsibility for correcting their own mistakes, but a mechanism is in place to ensure they do so, and to provide feedback to indicate whether or not the taxpayers' compliance plan is sound. Above these levels are the traditional principles of tax office enforcement that have a command and control quality. A soft version of command and control regulation is to wave a big stick, but to exercise discretion around using punishment to improve compliance

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  Handbook on Taxation

  • W.Bartley Hildreth, W. Bartley Hildreth(Authors)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Fourth, nearly all analyses of tax evasion in the United States have examined the factors that lead individuals who file tax returns to underreport their incomes. However, there is now evidence that nonfiling of tax returns is also a serious problem, especially for some occupations (Erard and Ho, 1995). More analysis of nonfilers is an important area for future research.

  Fifth, most analyses of tax evasion have focused on individual compliance with the income tax. Clearly, however, compliance is an important issue for all other taxes, especially the firm decision to comply with the corporate income tax and with sales and excise taxes. For example, Rice (1992) and Greene (1997) have examined some aspects of corporate Tax Compliance, and Murray (1995) has analyzed firm compliance with sales taxes. More such work is required.

  Sixth, although individuals may cheat on the taxes they pay to government, they also may cheat on the benefits they receive from government, especially for welfare transfers and tax credits. Compliance with government transfer and benefit programs has only recently begun to receive much needed attention (Scholz, 1994; Joulfaian and Rider, 1996).

  Seventh, there have been relatively few systematic analyses of compliance in other countries, despite the fact that noncompliance is almost certainly more of a problem in, say, developing countries than in the United States. Data availability is obviously an important reason for this omission, however, recent work by Aim, Bahl, and Murray (1990, 1993) for Jamaica, as part of a comprehensive tax reform, indicates the potential for such work. Working with the full cooperation of the government of Jamaica, they were able to construct data sets that allowed them to estimate the responses both of employees and of the self-employed to changes in tax, penalty, and audit rates in the individual income tax; they were also able to estimate the criteria by which self-employed income tax returns were selected for audit. Their results demonstrate that Jamaican taxpayers respond in significant ways to the various incentives and that audit selection is endogenous.

  Eighth,

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