Australians have a strong commitment to the principles of taxation. An overwhelming majority believe it is their responsibility to pay tax and that tax enables the government to do worthwhile things that make life better for everyone.
Australians, however, question the reasonableness and fairness of the system. They see some people as having more opportunity and a greater willingness to get out of paying tax than others, and while Australians readily admit that this is wrong, they seem to think that a lot of people are getting away with it.
The distortions introduced by legitimate, illegitimate and indeterminate strategies to reduce the tax paid to government is likely to influence Australians’ impressions of fairness in the system. Interestingly Australians seem to be able to tolerate a considerable amount of unfairness before retaliating. When unfairness does ‘kick-in’, however, community response can be vociferous and resistance can be enduring. This was particularly the case when taxpayers felt that they had been treated badly as individuals - that they had been treated disrespectfully or deceived or taken advantage of in some way. The Centre’s work has consistently supported the importance of The Taxpayers’ Charter as a code of practice for tax administration.
There was very little evidence over a range of studies of simple relationships between attitudes and cheating on tax. The factors that cause us to cheat are many and varied, and we suspect that context, intermediaries and the amount of control we personally exercise over our tax affairs plays a central role in how likely we are to evade or avoid tax.
Our mindset about tax does play a small part in explaining why some of us pay our tax while others do not. The first mindset might be called tax obligation and describes the view that we should pay tax, we will be caught and penalised if we don’t pay tax, and overall, the tax system works pretty well for all of us. Within this mindset, there was confidence in the integrity in the system and tax is paid with good will.
The second mindset is called victimisation, and describes feelings of being treated unfairly by the Tax Office in terms of how much tax is paid. Being victimised also means feeling excluded and distrustful of the Tax Office. Those who feel victimised resist paying tax or pay reluctantly.
The third mindset is freedom from Tax Office constraint. This mindset brings confidence that there is a way of beating the taxman through gaming the law.
These three mindsets are all present in the Australian population and can be held by any of us depending on circumstances. They work together and combine with other factors to determine our responses to tax regimes. Some of these response are covered in comments by CTSI staff on their most important findings [link].
Val Braithwaite, Director, CTSI