Tax compliance and the psychology of justice: mapping the field

According to this popularised aphorism, taxes are ubiquitous, as they affect practically everybody, and surely they are as little in our personal interest as death. Yet, while the everyday use of the expression does not occur without a wink, science seems to have missed the humour in it. It is certainly true that taxation deserves the closest scientific attention, as hardly any other legislation has such a widespread impact on our lives, from 'impacting personal decisions to shaping economic phenomena, political forces and the institutional fabric of our society'. Furthermore, the failure to comply with tax laws costs states billions of dollars each year, thus impacting severely on their provision of government services and their socio-economic functioning. However, the dominant theoretical paradigm that understands tax compliance in terms of individual self-interest, that is, as an individual's rational choice aimed at maximising individual outcomes under conditions of uncertainty, misses important dimensions of the phenomenon.Aldershot, U

Misperceptions of social norms about tax compliance (2): A field experiment

Based on insights from an earlier study with a student sample (Wenzel, 2001), the present research evaluated an intervention to increase tax compliance that involved two steps. In step 1, taxpayers were sent a survey about their own personal norms and behaviour as well as others’ norms and behaviour concerning taxpaying. In step 2, they were informed about a systematic self-other discrepancy in their perceptions, suggesting that taxpayers wrongly think that most taxpayers hold norms of honesty to a lesser degree (injunctive norm) and act less honestly (descriptive norm) than they themselves do. Feedback about the survey results should encourage taxpayers to correct their perceptions of social norms and thus increase compliance. Deduction claims of four groups of taxpayers (injunctive norm feedback, descriptive norm feedback, survey only, control) were analysed and revealed no treatment effects for claims for work-related expenses, but a significant reduction of claims for other deductions in the injunctive norm feedback condition compared to the control conditions

Misperceptions of social norms about tax compliance (1): A prestudy

Taxpayers may justify non-compliant behaviour with the perceived high prevalence (descriptive norm) or high acceptability (injunctive norm) of tax non-compliance in the population. However, their perception may be distorted: their taxpaying behaviour may follow misperceived norms and reflect ‘pluralistic ignorance’. In an experimental questionnaire study focusing on the injunctive norm, psychology students were asked, in a first step, about their personal tax-related beliefs and behaviour and the perceived beliefs and behaviour of others. The results confirmed the divergence between average personal beliefs and perceived beliefs of the average. In a second step, participants were given feedback about either this divergence or about a norm-irrelevant finding (control). The intervention significantly improved the perceived tax beliefs of others (injunctive norm) and, mediated by this effect, increased hypothetical tax compliance. The findings encourage tax-regulatory measures based on these theoretical considerations

Principles of procedural fairness in reminder letters and awareness of entitlements: A prestudy

Reminder letters by tax authorities are typically to the point and brisk, if not threatening. While appropriate from a deterrence-based regulatory approach, they may lack qualities conducive to a regulatory approach based on a more cooperative relationship between tax authorities and taxpayers. In particular, they may be considered to violate principles of procedural justice. In an experimental questionnaire study with a student sample, reactions to two alternative reminder letters, designed to incorporate principles of informational justice and interpersonal justice respectively, were compared to the standard letter. Furthermore, the effects of the letters were tested when three different rights (informational, interpersonal, conciseness), as granted in the Taxpayers’ Charter, were made salient. It was predicted that respondents would regard a letter as fairer when the salient right was matched in the letter than when it was not. This prediction was confirmed for the two letters that incorporated justice principles. Furthermore, overall the interpersonal letter was regarded most fair; and making respondents aware of the interpersonal right increased their perceptions of fairness. However, while perceived fairness was related to hypothetical compliance, the experimental factors had no influence on compliance. There was only correlational evidence that perceived letter qualities were related to compliance; for interpersonal justice, this relationship was fully mediated by perceived justice

Altering norm perceptions to increase tax compliance

This study tested the effects of an intervention designed to increase compliance and honesty in work-related expenses (WRE) and other deduction claims. The research follows on from earlier work documented in Centre for Tax System Integrity (CTSI) Working Papers No. 7 and 8. Overall, the research adds further empirical support to the usefulness of such a norm-based approach to increase tax compliance, identifies possible limiting and facilitating conditions and encourages further attempts to apply such a strategy more broadly. The intervention was based on the assumption that taxpayers overestimate the level of endorsement of tax cheating among Australian taxpayers. People tend to think they themselves have more ethical views about taxpaying than they think most others have. Given the possibility that taxpayers are influenced by what they consider to be the social norm, such an overestimation of tax evasion and its endorsement by fellow Australians could lead to a decline in tax compliance. Therefore, the intervention tested in this study aimed to correct people’s misperception of the social norm and thus increase compliance in tax deduction claims. In this study, 2250 individual taxpayers were randomly assigned to three different experimental conditions. In the norm feedback condition, taxpayers received a letter that informed them about recent survey findings, indicating that people think most others accept tax cheating more than they actually do. Then taxpayers were asked to participate in a survey asking further questions on this finding. The two other conditions served as control groups. In the survey only condition, taxpayers did not receive any information about the previous research findings and were only asked to participate in the survey. In the no survey condition, taxpayers were not contacted at all; no survey data was available. Actual tax return data were compared between all three groups to investigate the effects of the intervention on levels of deduction claims. The survey data showed that the norm feedback had some effects in altering people’s perceptions of the social norm, but these depended on participants’ level of income and their degree of identification as Australians. The tax return data showed that WRE claims were significantly lower in the norm feedback condition than in the two control conditions, which in turn did not differ from each other. This effect was not further moderated by income level. In contrast, other deduction claims (gifts/donations and dividends/interest) showed no differences between all three conditions

Deflection of a Viscoelastic Cantilever under a Uniform Surface Stress: Applications to Static-mode Microcantilever Sensors Undergoing Adsorption

The equation governing the curvature of a viscoelastic microcantilever beam loaded with a uniform surface stress is derived. The present model is applicable to static-mode microcantilever sensors made with a rigid polymer, such as SU-8. An analytical solution to the differential equation governing the curvature is given for a specific surface stress representing adsorption of analyte onto the viscoelastic beam’s surface. The solution for the bending of the microcantilever shows that, in many cases, the use of Stoney’s equation to analyze stress-induced deflection of viscoelastic microcantilevers (in the present case due to surface analyte adsorption) can lead to poor predictions of the beam’s response. It is shown that using a viscoelastic substrate can greatly increase sensitivity (due to a lower modulus), but at the cost of a longer response time due to viscoelasticcreep in the microcantilever. In addition, the effects of a coating on the cantilever are considered. By defining effective moduli for the coated-beam case, the analytical solution for the uncoated case can still be used. It is found that, unlike the case of a silicon microcantilever, the stress in the coating due to bending of a polymer cantilever can be significant, especially for metalcoatings. The theoretical results presented here can also be used to extract time-domain viscoelasticproperties of the polymermaterial from beam response data

Principles of procedural fairness in reminder letters: a field experiment

This study tested the effectiveness of different styles of reminder letters that reminded taxpayers of their requirement to lodge Activity Statements (AS) to report about tax instalments and withholding obligations, Goods and Services Tax or other business-related taxes. Specifically, it tested whether reminder letters that were based on principles of procedural fairness would yield more positive reactions from taxpayers and greater rates of compliance compared to the standard letter used by the Australian Taxation Office (Tax Office). Overall, the evidence was weak and inconsistent, however there were some promising results that indicate the usefulness of a procedural justice approach and encourage further work. The alternative styles of reminder letters tested in this study were based on the assumption that taxpayers are concerned about the procedural fairness of their treatment by tax authorities. More specifically, one letter was designed to correspond to the principle of informational fairness (transparency and justifications of decisions); another letter was meant to realise interpersonal fairness (consideration and respect); a third letter was the Tax Office standard letter. In addition, letters referred to the Taxpayers’ Charter and either explicitly to the Tax Offices’ commitment to taxpayers’ right to informational fairness, their right to interpersonal fairness, or to no specific right. Combining the three letter versions and the three different references to the Taxpayers’ Charter, nine different letters were compared altogether. It was predicted that fair letters and the commitment to fairness rights would each contribute to compliance; but a letter matching a corresponding right was predicted to have most positive effects. Each letter was sent to a random sample of 500 taxpayers (excluding large companies and clients registered with a tax agent for AS purposes), who failed to lodge their quarterly AS for December 2001 on time. Subsequent client phone calls relating to the reminder letter were documented and categorised by Tax Office staff in terms of their prominent issues. Four to five weeks after issuing the reminder letter, tax records were accessed for taxpayers’ status as to their lodgment of the AS and, if relevant, payment of taxes owed. The results were not very consistent. However, both the informational and interpersonal letter yielded greater lodgment compliance of individuals compared to the standard letter. Granting an interpersonal right yielded somewhat greater lodgment compliance of nonindividual entities. Moreover, an informational letter matching an informational right yielded fewer accusations and blaming in phone calls and more payment compliance of individuals. However, it yielded somewhat less lodgment compliance of non-individual entities

A Systematic Study of the Native Geum L. species of Illinois

A systematic study of the seven species of Geum L. (Rosaceae) native to Illinois including G. aleppicum var. strictum (Aiton) Fernald, G. canadense Jaquin, G. laciniatum Murray var. trichocarpum Fernald, G. rivale Linnaeus, G. triflorum Pursh, G. vernum (Rafinesque) Torrey & Gray, and G. virginianum Linnaeus is presented. Early classification systems are briefly compared, especially regarding the topic of subgenera. Detailed taxonomic descriptions, distribution information including county citations, and identification keys were developed for this study. Two seperate keys, one for floral characters and the second for specimens in fruit are given for greater ease in proper identification. Two principal component analyses (PCA), one including vegetative and floral characteristics and another including vegetative and mature fruit characteristics, are used to illustrate the relative cohesiveness between the Illinois species. Most of the species involved show a high degree of separation in both floral and fruit studies. Of particular interest is the relationship between Geum canadense and G. virginianum. It has been proposed that G. virginianum is a naturaly occuring hybrid between G. canadense and G. aleppicum var. strictum. In the floral study these species segregate completely, although an affinity is apparent. Mild cohesion between the clusters in the fruit study representing Geum canadense and G. virginianum does reinforce the high degree of morphological similarity between these species. Indeed in fruit the main distinguishing characteristic is that the stipules of G. virginianum are up to five times the length of those on specimens of G. canadense. There are many morphological differences between G. virginianum and G. aleppicum var. strictum. From the distributions of the proposed parents it is unlikely that G. virginianum occurs as a natural hybrid in Illinois. Geum virginianum occurs in the southern 1/4 of Illinois while G. aleppicum var. strictum occurs in the northern 2/3 of the state. These groupings conform to the currently accepted species

The effects of different letter styles on reported rental income and rental deductions: An experimental approach

This paper reports on an experimental study, conducted in collaboration with the Australian Taxation Office (Tax Office), investigating the effects of different letter styles on the rental income reported and rental deductions claimed by 6803 taxpayers with rental property. In June 2000, letters were sent out through the Tax Office to a number of rental property owners. The letters varied in tone (either a ‘soft’ and cooperative tone or a ‘hard’ and threatening tone was used) and in content (being informed about completing rental information in the tax return correctly, being sent a Rental Property Schedule (a schedule) to complete and return, being sent a schedule to complete and return, together with an information booklet, or being sent a schedule that did not have to be returned to the Tax Office). The letters were sent to two samples of taxpayers: those who had been sent a schedule to complete in previous years (touched sample); and those who had not previously been sent a schedule (untouched sample). It was found that being sent a schedule and having to return it to the Tax Office was paramount in reducing the amount of deductions claimed for rental property compared with a control group, for both those previously touched and previously untouched. Further, for those previously touched, a hard tone resulted in fewer rental deduction claims than did a soft tone when the schedule had to be returned. This pattern, however, was reversed when the schedule did not have to be returned. A hard tone resulted in more rental deduction claims than did a soft tone. It is argued that reactance may have been aroused when taxpayers felt illegitimately threatened, producing an increase in rental deductions claimed when they were not under surveillance. A further study (beginning June 2001) will investigate further the relationship between illegitimate threat and deduction claims relating to rental property