Chris Evans

Sustaining Growth in Developing Economies Through Improved Taxpayer Compliance: Challenges for Policy Makers and Revenue Authorities

The existing body of literature on taxpayer compliance has developed over some 30 years or more and has predominantly emanated from developed economies including the United States, the United Kingdom, Canada and Australia. Over the same period many developed economies have made considerable investment in legislative tax reforms, taxpayer education programs, tax enforcement strategies, and increasingly sophisticated systems of tax administration using new technologies. Undoubtedly there are lessons to be learnt from studying best practice in developed economies. However, compared to their counterparts in developed economies, policy makers and revenue authorities in developing economies face quite different challenges and constraints that require careful consideration in designing appropriate and effective tax systems. In particular, the tax system in a developing economy must foster sustainable economic growth, ensuring that the necessary revenue collections are made to provide for political stability, investment in infrastructure and improved standards of living. Typically developing economies have both limited administrative resources and expertise. Tax administration is generally weak, with widespread evasion, corruption and coercion. Further, taxpayers tend to have low levels of literacy, low tax morale and negative attitudes towards government. The cash economy, and its inherent opportunities for engagement in fraud and tax evasion, often plays a major role in developing economies. This paper explores these challenges and constraints in developing economies. It uses Nigeria as a case study, and identifies the strategies considered to be most effective in improving both personal and corporate taxpayer compliance and the necessary steps to implement them in order to achieve sustainable economic growth.

The operating costs of taxation: a review of the research

This paper considers key aspects of the literature on the operating costs of taxation, identifying the factors that have led to its development and evaluating its impact on policy responses to compliance and administrative costs issues. It starts by identifying the key components of the operating costs of the taxation system. The paper then identifies the main research trends over the past 60 years or so around the world, placing current concerns about taxation compliance and administrative costs within a broader - deregulatory - context and analyzing governmental responses to concerns about compliance costs highlighted by the literature. Finally, it offers some tentative views on the likely directions that research in the area may take in the coming decades.

Challenges in Understanding Compliance Behaviour of Taxpayers in Malaysia

Since the implementation of self assessment in Malaysia almost a decade ago, taxpayers’ compliance behaviour has attracted considerable attention. Tax compliance research in Malaysia has predominantly been in the context of income tax and personal taxpayers, and has been conducted using survey methods and experimental approaches. Access to taxpayers’ data is rarely made available to academic researchers by the Inland Revenue Board of Malaysia (IRB), thus studies have tended to rely on self-reported behaviour and convenience sampling which have limited the extent to which findings can be generalised. Further, most studies have considered only a limited range of variables that may or may not influence compliance behaviour which is widely recognised as being a complex phenomenon. Based on studies to date, it appears that Malaysian taxpayers have high ethics and that individuals’ tax knowledge is a key influence on their compliance behaviour. Scope exists for further research using a range of methodologies, studies that are more comprehensive and longitudinal, and using a wider range of taxes, taxpayers, and compliance obligations.

Personal Taxpayer Compliance Costs: Recent Evidence from Australia

This article reports on the tax compliance burden of Australian personal (non-business) taxpayers in the 2011-12 tax year. A survey of just over 4,000 individuals was conducted in late 2012 and average tax compliance costs were derived from the data and combined with macro-statistics to generate aggregate personal taxpayer compliance costs. The study demonstrates that personal taxpayer compliance costs have grown by about 73 per cent since 1995 and suggests that various technologically driven simplification initiatives undertaken by the government (such as e-tax and pre-filled income tax returns) have not been sufficient to slow down this growth in personal tax compliance costs.

Perceptions of Corruption and Tax Non-compliance Behaviour: Policy Implications for Developing Countries

Tax non-compliance and perceptions of corruption are key challenges to state-building in developing countries. Using a social psychology approach, we develop a theoretical model in which different forms of perceived corruption can adversely influence the way individual taxpayers behave. We then apply this model to Indonesia, placing our empirical findings in the context of compliance risk management, identifying strategies to improve tax compliance, and exploring how to implement these strategies effectively. We shed light on the applicability of the traditional responsive regulatory approach (used by revenue authorities to deal with intentionally non-compliant taxpayers), which combines measures in attempting to achieve either voluntary or enforced compliance. While the empirical evidence is based on the Indonesian experience, we suggest that our model is sufficiently general and robust to be applicable to other developing countries in the Asia-Pacific region.Perceptions of corruption and tax non-compliance behaviour are key challenges to state-building in emerging countries. This paper develops a theoretical model in which different forms of perceived corruption can adversely influence the way individual taxpayers behave using a social psychology approach. This paper then applies the model to Indonesia and places the empirical findings obtained in the context of compliance risk management to identify strategies designed to improve tax compliance and to explore the necessary steps to implement them effectively. It sheds light on the applicability of the traditional responsive regulatory approach, which adopts various combinations of measures to achieve either voluntary or enforced compliance, utilised by revenue authorities in specifically dealing with intentionally noncompliant taxpayers. While the empirical evidence is based on Indonesian experience, it is suggested that the model is sufficiently general and robust to be applicable to other emerging countries in the Asia-Pacific region.

Managing tax complexity: The state of play after Henry

The most recent, significant tax reform review in Australia, popularly known as the Henry Review, was publicly released just over six years ago. This article provides a critical examination of Australias experience in tax complexity management since the Henry Review. Two main observations are put forward. First, not surprisingly, very few of the Henry Reviews recommendations related to tax simplification have been implemented. The Henry Review has achieved relatively more with respect to personal income taxation than business income taxation. Second, tax complexity in Australia has been increasing since the Henry Review from both the legal and economic perspectives. An attempt is then made to explain why it is so hard to simplify the tax system in Australia and elsewhere.