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Journal of Australian Taxation |
MEASURING AND ANALYSING DETERRENCE IN TAXPAYER COMPLIANCE RESEARCH
By Ken Devos[∗]
The tax compliance behavioural literature indicates that among other factors, demographic variables found in the social and psychology models of taxpayer compliance play an important role in the compliance behaviour of taxpayers. However, in measuring and analysing a deterrent impact the basic economic deterrence model has failed to consider these demographic factors. Consequently, this article critically examines the variables employed in the basic economic deterrence model of taxpayer compliance with respect to the measurement of deterrence and compares this with an examination of the demographic and other variables employed in the social and psychology models. The recommendation is made that selective demographic and other variables ought to be included in a combined or expanded model in order to best measure deterrence. This will not only ensure how deterrent measures are revealed but more importantly, how taxpayers’ perceptions of deterrent measures are formed.
Deterrence theory is one of the major theoretical areas of taxpayer compliance. There have been great research advances made in deterrence theory over the years, with particular reference to the deterrent effect of different forms of sanctions. However, research has slowed since 1986 and in particular an offshoot of deterrence theory, neutralisation theory,[1] has been lacking in research attention.[2] It has also been suggested that the basic economic deterrence model has seriously under-estimated the actual level of tax compliance.[3] To add to this, the development of the social and psychology models of taxpayer behaviour have also impacted upon and challenged the principles and fundamentals of the pure economic deterrence model with respect to taxpayer compliance.
For these reasons it is important to investigate the compliance variables utilised in the economic deterrence model with a view to analysing their appropriateness and relevance in developing deterrence theory. In particular, the aim of this article is to analyse the various compliance variables which currently exist in the pure economic deterrence model and make a recommendation that additional compliance variables ought to be employed to assist in measuring deterrence.
The remainder of the article is structured in the following manner. Part 2 begins with a brief discussion of the definition and nature of deterrence, followed by a discussion of the rationale for deterrence in Part 3. Part 4 presents the general features and major variables used within the economic deterrence model, for example sanctions, probability of detection and audit rate, sanction enforcement, tax rate, income level and complexity. Part 5 then puts forward a recommendation that additional compliance variables, including demographics, ought to be considered, which arguably improve the measurement of the impact of deterrence upon taxpayer compliance. Finally, the limitations of the analysis and some concluding comments are given in Part 6.
It is of crucial importance to define the field of enquiry because the concept of deterrence is a complex and difficult one. Deterrence by punishment has been described as a method of retrospective interference, by holding out threats that whenever a wrong has been actually committed the wrongdoer shall incur punishment.[4] However, the term deterrence is used more restrictively, applying only to cases where a threat causes individuals who would have committed the threatened behaviour to refrain from doing so.
One distinction which is of crucial importance relates to issues of marginal deterrence and absolute deterrence. When comparing the rates of behaviour that would result from a particular threat with the rates of behaviour that could be expected if the threat were removed, this would indicate the absolute deterrent affect. On the other hand, the comparison of the effectiveness of one type of threat (eg 10 years jail v 15 years jail) will give an indication of the marginal deterrent effect of the larger penalty in reducing the rate of the threatened behaviour below that experienced under the lesser penalty.[5]
A further distinction which is commonly drawn upon in the literature[6] is that between general and specific or (individual) deterrence. The primary objective of specific deterrence is to improve the criminal sanction in such a way as to dissuade the offender from repeating their offence. General deterrence aims to discourage potential offenders by advertising the punishment of convicted offenders. However, many who draw this distinction make no further use of it and have drawn what is essentially the same distinction in terms of ‘intimidating’ and ‘deterring.’[7] Rather than a dichotomy we see the special effects of punishment as one variable condition in deterrence. An act of punishment may be seen as an attempt to enhance deterrent threats not only for potential criminals in society, but also for those who are actually punished by altering the way they will respond to the threats in the future. Similarly, all that is involved in the common practice of imposing progressively heavier sentences on recidivists (which has also been called special deterrence) is just a more rigorous application to a particular group of the principle of general deterrence.[8]
Some researchers have suggested that other psychological processes, by which the threat of punishment might result in deterrence, could be referred to as simple or direct deterrence.[9]
The theory of simple deterrence is that threats can reduce crime by causing a change of heart induced by the unpleasantness of the specific consequences threatened.[10] This compares a crime with a particular penalty at a specific moment. If the individual is to be kept law abiding the process of simple deterrence must confront him at every turn, making forbidden conduct a risk not worth taking. This is strictly an economic view of the punishment: weighing the benefits against the cost. An analogy which is used here is one of a potential customer peering at a price list, where the value of the punishment must not be less than what is sufficient to outweigh that of the profit of the offence.[11]
Other researchers have recognised the plausibility of the notion that some people sometimes refrain from crime specifically to avoid unpleasantness.[12]
In other words, they have recognised the conceptual scheme of the classical theorists. This scheme indicates that even though crime may be incompatible with some aspects of experience it is still compatible with others. However, simple deterrence may still be more complex than the classical theory suggests.
Beyond the notion of simple deterrence are a number of less direct mechanisms through which the threat of punishment may induce compliance with the law. These more subtle processes may well be more important than simple deterrence in reinforcing patterns of law abiding behaviour. The search for these subtle affects involves a wide range of behaviours. Indeed, it has also been suggested that the hypothesis regarding the operation of general deterrence should be broadened. It should include the effect of punishment and all the institutions of criminal justice on the totality of conscious and unconscious motivations that govern the behaviour of men in society.[13]
Nevertheless, as a means of expressing social disapproval, punishment is a ritualistic device designed to influence persons by intimating symbolically society’s moral condemnation, and penal provisions may be seen as symbolising cherished values.[14]
Punishment as providing an educative role involves three aspects. First, the association of forbidden behaviour and bad consequences may lead individuals to view the behaviour itself as bad. Second, punishment by a legal system will communicate to the individual that the legal system views the threatened behaviour as wrong and that this information will also affect the moral attitudes of the individual. Third, threat and punishment may aid moral education by serving as an attention focusing mechanism.
Threat and punishment can also induce habits. With fear or moral influence as an intermediate link, it is possible to perhaps establish a condition of habitual lawfulness. Repeated observation of a rule which may initially be conscious and deliberate can induce a habitual disposition and ultimately automatic compliance. The principle importance of habit in relation to social control derives from the fixity of habit organisation and the consequent relative dependability of human conduct.
It is plausible to state that while the habit of obeying the law in particular situations develops over a period of time, the threat of punishment may initially produce a number of separate habits of compliance. But these in turn can result in a more generalised habit of obeying the law so that ultimately we reach a position where people automatically follow a pattern of learned behaviour that excludes the criminal alternative without even thinking about it.[15]
Yet if commands of a legal system were not reinforced with the threat of punishment many individuals would see no basis for complying with the legal system. For most people the threat alone would be enough to ensure conformity. However, some people may not be sensitive to the abstract threat of penalty. For them the penalties must be demonstrated in concrete sentences which they feel relevant to their own life situations.[16]
Also, if penalty provisions are not enforced, it can have a demoralising effect on the law abiding citizens who watch law breakers escape unpunished.
The imposition of punishment is a demonstration to society that the legal system is serious in its attempt to prohibit criminal behaviour. The unpunished criminal is a direct challenge to the authority behind the law. From this point of view, the significance of the individual sentence and the execution of it lie in the support that these actions give to the law.[17] The greater the pressure coming from repressed impulses the more aware becomes the ego that it needs the institution of punishment as an intimidating example acting against one’s own primitive world of repressed instinctual drives. The mere threat of punishment may not be enough, but rather a reassuring example of punishment actually being imposed may be required. Impunity may not only engender disrespect for the legal authority but also undermine the authority of conscience. If the threat of punishment plays a role in the development of morality and respect for the law, it is far from the only force at work in that phase of socialisation and since the threat of punishment and other socialisation processes are so closely interrelated, it is difficult to isolate the effects of threatened punishment.
‘Every criminal law system in the world, except one has deterrence as its primary and essential postulate. It figures most predominately throughout our punishing and sentencing decisions legislative, judicial and administrative.’[18]
When confronted with a criminal problem, legislators often agree that the best hope of control lies in ‘getting tough’ with criminals by increasing penalties.[19] The two basic extreme views of deterrence could best be expressed as either: purely increasing the severity of the penalty will increase the deterrent effect; or alternatively, because human behaviour is unpredictable and crime is determined by a variety of causes, deterrence is a myth. Despite the extreme views a belief in the efficiency of deterrent measures is attractive because it offers crime control measures where alternatives appear to be unavailable and does so without great apparent cost. To threaten with punishment is a very promising strategy for influencing behaviour.[20]
For instance, the Australian Taxation Office (‘the ATO’) has been known to have a deterrent effect upon taxpayers[21] without sometimes actually having the capacity to enforce the law. To what extent this has been successful remains to be seen. Nevertheless, given this background, the main reasons for deterrence can generally be explored from three viewpoints, which include ethical and moral, economic, and political aspects.
It has been suggested that in order to make the threat of punishment believable the criminal law must follow through by punishing those offenders it apprehends.[22]
Punishing people in order to deter them (or others) from committing future offences raises some questions about the justice of pain inflicted for deterrent purposes, which should be distinguished from the efficacy of deterrent strategies.[23] The effectiveness of a deterrent measure must be weighted against the morality of doing it right. One of the problems this philosophy encounters is that the punishment has so little to do with the particular offender. That is, it is not determined by the degree of reprehensibility of his conduct (as retribution is) and it cannot be justified as being designated to benefit the offender, as is the case with rehabilitation measures.[24] Indeed because it stems from other considerations, such deterrent punishments may generate conflict with rehabilitative and retributive precepts.
In fact punishment for deterrence seldom involves administering hash penalties solely for deterrent motives to people who would otherwise go unpunished. Except for regulatory offences, deterrent motives condition the degree of punishment far more often than they represent the single justification for punishing crime. Punishment is set as a result of the proper balancing of legitimate punishment objectives, and deterrence is certainly one of the legitimate objectives of punishment. However, is it fair that an offender’s sentence should act as a general deterrent to others and assist in their moral education? Certainly the notion that the severity of punishment should fit the crime, and not grossly exceed it, is one natural limit on the imposition of sanctions for deterrent purposes (ie the retributive limit or the principle of just desserts). Other researchers have indicated that in our present state of comparative ignorance about the sources of control of human conduct there is no escape from the use of punishment (whether criminal or not) as a device for reducing the incidence of behaviour we consider anti-social.[25]
The issue is that the possibility of alternatives to just imposing heavier penalties should be explored from an ethical point of view.
It should also be recognised that the harm suffered by offenders as a result of the extra measure of punishment administered for deterrent motives must be recognised as a substantial cost to the community as a whole. The offender’s interest must be given due consideration, as does that of the community in general. Consequently, administrators have a moral duty to the punished offenders to conduct further research on the ‘deterrent effect’ of their policies. A belief in deterrence is morally acceptable, only as long as it is necessary. When facilities exist for the evaluation of sanction policies, failure to test policies while continuing to penalise offenders is morally unjust. In this sense, further research needs to be done to gauge the effectiveness of deterrence measures.
The exemplary sentence is one designed to meet the needs of deterrence felt in particular cases or groups of cases. Such sentences are usually imposed to deal with specific offences which have suddenly become more frequent or more serious. The ethical problems that emerge from such a sentence include the issue of fair notice, that is, the offender being aware of the penalty for such an offence. Another problem is the issue of the punishment achieving the general goal of deterrence which is difficult to measure. Inequality can also be a problem where offenders are ‘singled out’ for more serious punishment than other offenders. One way to overcome this has been the imposition of exemplary sentences on high profile individuals by the courts. The utilitarian justification is that these cases, where the exemplary sentences are apt, achieve the greatest amount of attention and presumably the greatest deterrent impact.[26]
Estimating the cost of a crime prevention program is essential to the government authority which decides whether a particular program will create sufficient returns to justify the commitment of resources necessary to bring it into existence. The comparison of the costs of alternative programs in order to arrive at marginal costs is, together with the marginal value of revised output, required to provide the basis of a decision under the basic model of economic analysis. It has been stated that the function of the concept of cost is to enable ‘choices of alternatives according to some criterion of preference’.[27] The most expensive aspects of law enforcement from a revenue authority’s perspective are tax officers and punishment facilities (ie prosecution and sentencing).
However, in the context of deterrence, it may be more important to explore the social benefit cost (ie values of humanity, justice and disvalues of pain and suffering) rather than just pure economic efficiency.
A number of modest points can be made about cost considerations in deterrence. For instance, the study of costs in crime prevention is necessary for policy research as well as for accounting purposes. Researchers should seek to establish, first, the types and amounts of the program costs, which would include both monetary and non-monetary costs (the cost of offender rehabilitation). Second, the nature of the program’s effect on crime needs to be investigated. For example, testing for marginal deterrence[28] and general deterrence amongst the general population. Third, the extent of the program’s effect, that is, how much is attributable to the new policy, should be investigated. In particular, the quantity of the effect rather than the quality is paramount. Finally, alternative programs that can achieve better results at less cost or similar results at lesser costs should also be employed. For example, an alternative approach that involves less offender suffering than the current one should be preferred as being cheaper.[29]
Deterrence should not be regarded as having a preferred position in crime control policy independent of empirical evidence as to effectiveness. Indeed, rational resource allocation in crime control should be the aim. It may be difficult to design research that can determine with any confidence the extent to which the increase in sentences has influenced the compliance rate through marginal or general deterrence, or both. Yet even when the extent of crime prevention cannot be precisely estimated, cost studies can assist in deciding how much impact on crime a particular program has, to justify its implementation.
The political nature of the punishment policy and the system that administers it is also an important element in the rationale for deterrence. The prescription of harsh penalties may on occasion create pressures and conflicts in society because of the character of the punishment, the crime, the victim, or because of some interrelationship between these factors. However, it has been suggested that the employment of harsh penalties leads to nullification of the law by virtue of the fact that at various levels or stages in the criminal justice process there may be a deliberate refusal to fully implement the statutes to which severe punishments are attached.[30]
Researchers have indicated that in these cases experience shows that excessively serve penalties may actually reduce the risk of conviction, thereby leading to results contrary to their purpose.[31]
When penalties are not reasonably attuned to the gravity of the violation, the public is less inclined to inform the government authority, the prosecuting authority is less inclined to prosecute and juries are less apt to convict.[32]
Previous situations have occurred where judges have systematically exercised their discretion in mitigating the severity of the law.[33] This suggests a number of general principles regarding the way in which increasing penalties for deterrent purposes may create pressures and conflicts. For instance, escalating the level of punishment might be acceptable and effective where there is no tendency on the part of jurors, judges, prosecutors and the revenue authority to identify with the offenders. Where there is a general moral condemnation of the behaviour being penalised, it is relatively easy to enforce harsh penalties.
On the other hand, where there is general sympathy for and identification with offenders it will be more difficult to achieve effective enforcement of penalties. In the case of tax evasion, where the behaviour may not be strongly condemned but widely tolerated for instance, enforcement of stringent penal provisions will be most difficult and most necessary in order to educate the community and to reduce a high rate of evasion. However, many societies have a tradition of minimal authoritative regulation of social life and are reluctant to enforce harsh penalties as a means to achieve social control.[34]
As a result of selective enforcement and discrimination between offenders, it is suggested that alternative means of enhancing deterrence, such as measures designed to increase the credibility of the threat of punishment, could be employed.
However, full enforcement is nevertheless quite impractical[35] and selective enforcement is inevitable. For instance, prosecutors have a discretion on whether to prosecute, juries may decline to convict but instead acquit the guilty, and sentences may be suspended. The widespread exercise of discretion (which constitutes an intrinsic limitation on the legislative process) may be viewed as advantageous in that it provides in-built checks and balances against the abuse of official power. In this way, the political aspect of deterrence may be both necessary and desirable.
Consequently, given the background regarding the nature and rationale of deterrence, this article proceeds with an examination of the major features and variables employed in the economic deterrence model with respect to taxpayer compliance.
Research on tax compliance based on the ‘economic deterrence’ approach considers both economic and structural factors in relation to compliance. This approach uses the utility function equation and experimental economics methods to help explain and predict compliance outcomes. The economic deterrence approach suggests that taxpayers make a cost–benefit analysis when deciding on compliance outcomes, and relies on enforcement for compliance to work.[36] The deterrence model attempts to explain the change in compliance behaviour rather than the level of compliance.[37] The purpose of the economic deterrence approach is to identify causality in the change of taxpayer behaviour in response to changing certain variables under examination, while keeping other variables constant. Without going into the detailed workings of this approach, a brief outline of the main features and advantages and disadvantages of the methods employed follows.
This method uses an algebraic mathematical equation[38]
which suggests that the rational taxpayer will maximise the expected utility of the tax evasion gamble by weighing the expected utility of under-reporting against the uncertain prospect of detection and punishment. The results produced under this method are theoretical and are not supported by empirical data. The findings from this equation, which examines changes in variables such as income level, tax rates, audit probability and penalty rates, are as follows:
• there is a direct relationship between audit rates and declared income (compliance will increase if there is an increase in audit probability);
• there is a positive relationship between the penalty rate and compliance;
• increases in income level and tax rates have ambiguous effects on compliance;
• the utility function only considers the income level on compliance and ignores deductions; and
• the level of compliance is determined by the level of enforcement and punishment.
The model relies on certain assumptions, for example:
• audit probability is fixed and random and is exogenously determined by the taxing authority;
• taxpayers will only face audit costs if audited; and
• taxpayers are fully knowledgeable of their true income levels.
Consequently, while this method is cheap, requiring no empirical testing and is free of human research issues (for example, non-response bias and invalid responses) the results remain theoretical in the absence of empirical data to support it. Also, if the assumptions on which the method is based are incorrect, this could adversely affect research outcomes. For example, these assumptions fail to capture the many institutional realities of audit rules and tax complexity.[39] The assumption that taxpayers only face audit costs if audited is inappropriate given that all activities involve not only monetary but also psychological costs, even for honest taxpayers.[40] Most important, the utility function fails to represent the actual taxpaying system in many facets (for example, audit policy and high compliance statistics), resulting in limited applicability in the real world. To address the theoretical problems of the utility function equation, the experimental economics method aims to produce another avenue for research into compliance behaviour of taxpayers by examining both economic and structural factors simultaneously.
This method involves using controlled laboratory experiments to test the causality of economic and structural factors on compliance, by controlling and manipulating certain variables while holding other factors constant. As mainly students are used as surrogates for actual taxpayers, it is convenient. However, the empirical data gathered has limited external validity.
The obvious advantages of the experimental economics method are its high response rate due to the convenient sampling of students, the low cost involved due to conducting the test in a controlled environment and the consequential high internal validity of the data. This has given this approach the capability to effectively investigate the effects of changes in economic and structural factors upon tax compliance.
On the other hand, a disadvantage of the experimental economics approach is that it still involves making certain analytical assumptions about the sample chosen in order for the results to be valid to other taxpayers. Also, the results drawn from students would have limited application to the general taxpaying community and consequently certain findings do not concur with the reality found in the taxpaying community. Likewise, the possibility of simultaneous causal interaction of crime rates and sanction levels and perhaps more generally of crime rates, sanction levels and criminal justice system resources, raises serious obstacles to empirical analysis of deterrence. To extract the deterrent impact of sanctions requires that simultaneous equation estimation procedures be used. The use of such procedures requires a number of assumptions about the nature of the simultaneous relationship, which again can be problematic.[41] Given the basis of the economic deterrence model, a closer examination and analysis of the major variables employed within the model follows, with a view to determining their effectiveness in measuring deterrence.
If the absolute deterrent effect of the threat of punishment is measured by the increase in crime resulting from the virtual elimination of any threat of punishment, there is little doubt that such effects are present and are frequently of substantial magnitude. Marginal deterrent effects as indicated previously are measured by the response of crime rates to incremental changes in penalty rates. If absolute deterrent effects are operating then over some range of incremental changes in penalty threats, marginal deterrent effects must also be present.[42]
A large body of research has established a negative association between crime rates and a variety of sanction risk measures.[43]
However, the question remains whether this negative association is a reflection of deterrence or is attributable to some other causes. An argument put forward by some researchers[44] is that the association is a reflection of a negative effect of crime rates on sanction levels, rather than the reverse.
Despite this, many studies have generally found that sanctions have a positive effect on tax compliance, although only mixed evidence has been found on how sanction severity impacts on compliance.[45]
The majority of studies which have examined sanctions as a compliance variable have either attempted to manipulate the penalty level in an experimental setting, or have used the actual penalty rates in the particular tax system being investigated. This has been the main failing of the research, as it is taxpayers’ perceptions of the penalty level rather than the real penalties which influence compliance.[46] In particular, there is a need for research into how taxpayers’ perceptions of the sanction levels are actually formed.[47]
The effect of different sanction types has also led to mixed results with respect to tax compliance research.[48] Social sanctions, such as naming and shaming, have produced positive results, as have the introduction of, and an increase in, penalties. This has been due to a number of reasons, for example cultural differences, different subject pools and occupational status. On the other hand, moral pleas[49] and positive inducements[50]
have also been found to have a significantly greater effect in improving taxpayer compliance than sanction communications alone. Consequently, despite the penalties variable being an important feature in measuring deterrence, it apparently needs to be supplemented by other tax compliance variables and measured in alternative ways. Therefore, perhaps the operationalisation of the variable[51] holds the most potential relevance for the field of tax compliance research.
Although strictly not a variable within the economic deterrence model, it is considered important to analyse the deterrent aspect of sentencing upon taxpayer compliance. Particularly given that the strength of any penalty or sanction ultimately relies upon its imposition, it is important to consider the judicial opinion of deterrence.
In the case of R v Williscroft,[52] the majority cited with approval the passage from the New Zealand case of R v Radich[53] that stated:
one of the main purposes of punishment … is to protect the public from the commission of such crimes by making it clear to the offender and to other persons with similar impulses that, if they yield to them, they will meet with severe punishment. In all civilised countries, in all ages, that has been the main purpose of punishment and still continues so.
It has also remained an ‘article of faith’ for the courts that punishment deters offenders. As King CJ of the Supreme Court of South Australia noted:[54]
I think that it must be conceded that there is no proven correlation between the level of punishment and the incidence of crime and that there is no clear evidence that increased levels of punishment have any effect upon the prevalence of crime. Nevertheless the criminal justice system has always proceeded upon the assumption that punishment deters and that the proper response to the increased prevalence of crime of a particular type is to increase the level of that punishment for that crime. I think that the courts have to make the assumption that the punishment that they impose operates as a deterrent.
However, in the case of R v Combey[55] Starke J expressed his personal reservations as to whether increasingly heavier sentences actually deterred offenders from re-offending. Likewise, similar sentiments have been expressed by the Queensland Court of Criminal Appeal.[56] The judiciary has also questioned whether marginal increases in already severe sentences will act as deterrents.[57] The courts have expressed the view that the certainty of detection and speed of prosecution are most likely to be effective as deterrents as the severity of punishment. On the other hand, legislatures that are unwilling or unable to invest resources in the criminal justice system to ensure that crimes are rapidly detected and speedily dealt with, have relied on increasing the severity of sentences as their principal deterrent to crime.[58] Whether this approach will produce the desired deterrent effect has been questioned by the judiciary, yet it appears that the courts still need to play their part in the overall deterrent process.
For example, in the High Court decision in Griffiths v The Queen, Jacobs J observed:[59]
The deterrent to an increased volume of serious crime is not so much heavier sentences as the impression on the minds of those who are persisting in a course of crime that detection is likely and punishment is certain. The first of these factors is not within the control of the courts, the second is. Consistency and certainty of sentence must be the aim … Certainty of punishment is more important than increasingly heavy punishment.
Also, the Court of Appeal of the Supreme Court of Victoria observed in R v Moffatt[60] that:
A custodial sentence sends a salutary signal to all persons, no matter how unblemished their records, that depredation of trust monies, as trustee, in significant sums warrants gaol. It is likely that many persons in the general community will be deterred from the commission of these offences if it is generally known that prison follows.
Deterrence has also received legislative recognition in s 5(1)(b) of the Sentencing Act 1991 (Vic) and it has been held that an appropriate sentence will depend on the fundamental notion of general deterrence.[61] However, deterring unknown future potential offenders from committing a similar offence is not a sufficient reason for imposing a disproportionately harsher sentence than the particular crime requires. This goes against the principle of proportionality. Nevertheless, the courts in recognising that their sentencing policies will not, of themselves, prevent serious crime,[62] believe sentences can still have a dramatic deterrent effect if appropriately applied. Consequently, in terms of improving overall taxpayer compliance, this is a vital factor that should not be underestimated in the measurement and analysis of deterrence.
The definition of audit rate is the probability that the return is selected for audit, while the probability of detection is the chance that non-compliance is discovered during that audit. Based on this premise, some researchers have suggested that beliefs about the probability of apprehension and certainty of punishment are more important than the sanctions actually imposed.[63] It is interesting to note, for example, that countries like Germany and England achieve similar levels of compliance but through different methods. Germany has been known to employ rigid assessment and enforcement policies at considerable social cost, whereas England’s less rigid policies foster a willingness to cooperate with tax officials at the expense of rendering enforcement procedures redundant.[64] Consequently, while the compliance variable of the probability of detection is vital in achieving deterrence, it can be employed successfully through different modes.
In a study undertaken by Mason and Calvin,[65] the independent variable with the strongest correlation with admitted tax evasion is belief in the probability of not being apprehended. The better educated in that study believed that their chances of getting caught were low. However, beliefs about the probability of apprehension may also be affected by personal experience, peer influence and mass media exposure. Although direct measures of these influences are difficult to gauge, an indirect assessment could be made by examining audit and criminal investigations. In Mason and Calvin’s study, the low audit rate in combination with non-prosecution and the unwillingness of offenders to publish their deviance resulted in a low deterrent effect. The study also concluded that the deterrent effect of civil and criminal penalties remains uncertain. While those who are audited and punished may be dissuaded from further evasion, the general deterrent effect upon others may be small. Consequently, the authors implied that patterns of evasion could not be explained by any simple concept of deterrence.
However, fear of apprehension may effect compliance in other ways. Some researchers[66]
argue that anxiety produced by uncertainty about the likelihood of detection plus the severity of punishment can be an effective deterrent. Likewise, the perceived seriousness of tax evasion may also act as a deterrent and affect compliance rates. The perception of tax evasion as a crime is critical here, and interestingly this was found to be only moderately serious in a study conducted by Karlinsky, Burton and Blanthone.[67] In the study, on a scale of some 21 offences (including white collar crimes) tax evasion ranked 11, or around half way. Whether there is a link between the perception of tax evasion as a crime and the probability of being detected for that crime remains to be seen.
Nevertheless, detection probability is one of the most frequently examined variables in taxpayer compliance that the majority of evidence suggests taxpayers in general significantly overestimate.[68]
Again it is the taxpayers perceived probability of detection rather than the actual probability which should be used in measuring the deterrent effect.[69] A number of demographic factors have been linked to taxpayers’ perceptions of the probability of detection along with the opportunity to evade and other ethical and revenue authority concerns. Likewise detection probability has been found to be dependent upon the type of non-compliance (ie overstating deductions or under-reporting income). There is also evidence that suggests that compliance levels differ depending on whether a random or strategic audit policy is employed by the revenue authority, as compliance was found to be higher where returns were strategically selected for scrutiny.[70]
Overall, an assessment of this variable indicates that it is a vital factor in the measurement of deterrence.
Although a substantial level of research has been conducted on tax rates, it is still unclear how this variable impacts upon taxpayer compliance. Mixed results of studies using three research methods (surveys, experiments and regression models) have been produced, possibly due to taxpayer unawareness of rates and lack of taxpayer opportunity to influence rates. Another reason for the mixed research results could be due to evidence of strong correlation between rates and compliance, and the danger of not controlling for it.[71]
However, it is also clear that the mixed results might be due to the failure to control for taxpayer perceptions. Only a few studies have examined the relationship between perceived tax rates and taxpayer compliance, but these have also produced conflicting results.[72]
Also tax rates have been found to be dependent upon taxpayers’ perceptions of horizontal equity. Where taxpayers were told that they were subject to the same tax rate as other taxpayers in the same position, an increase in the rate had no effect on compliance behaviour. Conversely, taxpayers reacted differently when told the opposite.[73] Consequently, it appears that the behavioural aspects of taxpayers, and particularly their attitudes to risk, need to be explored further to more confidently gauge any deterrent effect of the tax rate upon taxpayer compliance.
The research on the impact of income level upon tax compliance is also very mixed, with a number of studies providing conflicting and inconclusive results. One possibility for the inconsistencies could be the correlation between income level and other compliance variables, particularly the difficulty in separating the effect of income level from the effect of tax rates.[74]
The correlations between the income level and other tax compliance variables may have also contributed to the mixed results, particularly income source.
Other studies have reported a positive correlation between income level and opportunity to evade, with opportunity being represented as either being in business or being able to claim deductions. The importance of the income level as a compliance variable may also be dependent upon gender as found in a study conducted by Hite.[75]
Hite found that higher income levels increased the apparent acceptability of non-compliance for female subjects but had no effect on the behaviour of male participants. If these attitudes are translated into behaviour, this provides another possible explanation for the conflicting findings on the income level variable.
It is also interesting to note that there is evidence for three opposing views with respect to the income level variable and tax compliance. That is, first, that the wealthy are the least compliant, second, that the poor are the least compliant and, finally, that both the poor and the wealthy are equally non-compliant while middle income earners are the most compliant.[76] It terms of deterrence these studies indicate that the poor and the wealthy are the income groups that may need to be targeted by the revenue authorities. Also, as these groups tend to be the minority in the Western economies, the research may be suggesting that deterrent measures are not as important to the wider majority of complying middle class taxpayers. Consequently, despite some mixed previous findings, it would appear that this variable should be considered in conjunction with other tax compliance variables in measuring any deterrent impact, as there is the potential for some interesting results to emerge.
Complexity of the tax laws can impact on compliance in a number of different ways. It may encourage non-compliance by providing a greater opportunity for it. Complexity may also increase the uncertainty of the tax laws and thereby encourage greater compliance amongst risk adverse taxpayers or, alternatively, complexity can frustrate taxpayers and thereby reduce their willingness to comply.[77]
Major studies have been carried out by Long and Swingen[78] which indicate that tax complexity reduces not only a taxpayer’s ability to comply with the tax laws, but also his or her willingness to do so. Other studies[79]
have also supported these findings, but further research in investigating this variable is still needed. More recently, a study by McKerchar[80] in Australia found that the main cause of complexity was uncertainty in the tax laws and the level of detailed information that was provided to taxpayers as a result. Where taxpayers completed their own returns, complexity caused a high level of unintentional errors and these generally favoured the tax authority. Further, in response to complexity, some committed taxpayers chose to be intentionally over compliant. McKerchar’s study concluded that complexity compromised the fairness of the Australian tax system, by imposing an unfair burden on personal taxpayers, in terms of both compliance costs and taxes paid.
To rely on the assumption that most people are risk adverse and that therefore, increased complexity will act as a deterrent measure by encouraging greater compliance amongst taxpayers who want to ‘do the right thing’ and seek professional help, is dangerous. As found by McKerchar’s study, the perception of fairness will be compromised and people may even feel that to evade will be an easier option. Increasing complexity would certainly appear to have a more undesirable effect upon tax compliance and further research utilising this variable needs to be undertaken. Suffice to say that an assessment of this variable indicates that it is also a vital factor in the overall measurement of deterrence.
Consequently, based on the major tax compliance variables discussed thus far, it is apparent that the economic deterrence model assumes that taxpayers make compliance decisions in a social vacuum.[81] However, economic factors only partly contribute to our understanding of why people comply with the tax requirements. Human and behavioural factors also need to be accounted for. Consequently, the following section of the article now elaborates on how and why this should be done.
Given the most common variables of the economic deterrence model discussed previously, it is suggested that this model could be further improved by the incorporation of additional compliance variables also employed in the social and psychology models.[82] For example, a study by Schwartz and Orleans[83] showed that both sanction threats and conscience appeals could induce greater conformity, but conscience appeal was found to be more effective. While their study suggested that reminding individuals of the possibility of negative sanctions does help to secure conformity, the results confirmed that sanctions may be successful deterrents for only potential offenders. Once norms are violated the sanction threat losses its potency for inhibiting further violations.
Consequently, in order to enhance the measurement of the deterrent element, further analysis of taxpayers’ characteristics and their environment is highly recommended. One way to achieve this is to cater for the influence of demographic, social, political and cultural variables within the deterrence model. The way in which the deterrence of deviance varies by the characteristics of potential rule breakers has to be specified. Such things as social class, age, sex, race, social visibility, personal alienation from the political and social system, and moral commitments to the norms, will also be major determinants in assessing whether a deterrent effect is probable in a given situation.[84]
In particular, it is suggested that the following major demographic and other variables will play a vital role in measuring a deterrent impact upon the level of tax compliance.
A common finding amongst studies reviewed by Richardson and Sawyer[85]
(and previously Jackson and Milliron)[86]
was that female taxpayers were more compliant than their male counterparts. In particular, a comprehensive study conducted by Oxley[87] in New Zealand reported that women were more often compliers in comparison with men, and less often tax evaders or tax avoiders. However, Richardson and Sawyer noted that this compliance gap between males and females appears to be narrowing with the emergence of a more independent, non-traditional generation of women. In a survey of American taxpayers, Hite[88]
focused on the interaction between gender and education. Female respondents with college degrees tended to be more tolerant of non-compliance than females without college degrees. On the contrary, males tended to be less tolerant of non-compliance as their education levels increased. There are also studies that have looked at the effect of gender on sanction threat perceptions and found that taxpayers who perceive higher sanction threats are more compliant.[89]
The majority of studies reviewed by Richardson and Sawyer[90]
that examined the age variable found that older taxpayers tended to be more compliant than younger taxpayers.[91] However, there have been a significant number of studies that have found no relationship between age and compliance.[92] Richardson and Sawyer have proposed four possible explanations for the inconsistent findings. First, the significance of the age variable does not extend to all taxpayers. Second, inconsistent definitions of taxpayer non-compliance are employed throughout the research. Third, when age is considered in association with a number of other variables its affect on taxpayers’ compliance is diluted. Finally, the interaction of age with other compliance variables could be problematic. For instance, Grasmick and Bursick’s[93]
study revealed that older taxpayers have a higher perceived threat of legal sanctions, which in turn increases compliance. Similarly, Smith[94]
found that taxpayer ethics improve with age and thereby increase compliance levels. The greater tendency to be more compliant when one gets older could also be due to the lowing of risk taking attitudes.
Unfortunately, there has only been minimal research undertaken to date with respect to tax compliance and nationality. A literature review by Roth et al[95] which used whites and non-whites as a proxy variable found whites to be more compliant. However, Beron, Tauchen and Wittie[96] suggest that the results are dependent upon other variables used in the study. In particular, the income variable was found to have a distorting effect. Nevertheless, studies of commitment to compliance using indices have found the largest differences between races.[97] This could be an interesting finding in terms of the impact of any overall deterrent effect. How individuals from certain cultures view the payment of taxes is sure to produce differing results, which in turn should give some indication of the deterrent impact ones nationality and culture can have on taxpayer compliance attitudes.
The affect of education on taxpayer compliance is also unclear, based on previous studies. The reasons given for these conflicting findings are varied. First, there can be difficulty in determining which aspect of education is being measured. Comprehensive literature reviews[98]
have identified four measures of education: the general degree of fiscal knowledge, knowledge involving evasion opportunities, general educational attainment and specific tax knowledge. These different dimensions may assist in explaining the confusion surrounding the effect that the education variable has on taxpayer compliance. Correlations between education and other compliance variables may also have contributed to the inconsistent results found. Other possible compliance variables that have been suggested to have a relationship with education are gender,[99]
income level,[100]
ethics,[101] taxpayers’ perceptions of fairness,[102] detection[103]
and sanctions.[104]
A few studies have also examined the link between higher levels of education and taxpayers’ detection and sanction perceptions. For example, Smith[105]
found that the perceptions of the probability of detection are lower for those taxpayers with a higher level of education, while Grasmick and Bursick[106]
found a similar relationship between education and perceived threat of sanctions. More importantly, it was found that there also appeared to be a need for the incorporation of the education variable in future studies, if a more accurate measurement of deterrence was sought.[107]
There is a lack of clear research direction with respect to occupation and employment status as variables contributing to taxpayers’ compliance behaviour.[108]
The reasons for this lack of clarity could be that many studies employ different occupational categories in their research. These occupational categories have ranged from specific occupational stratums[109]
to broad categories.[110] Another reason for the lack of direction could be the suggestion that the opportunities for non-compliance are associated with the particular occupation rather than the occupation itself.[111] In its current status, this variable tells us little, if anything, of a deterrent effect upon taxpayer compliance. Nevertheless, future research should be employed using occupation as an independent variable.
The majority of studies reviewed on the relationship between ethics and taxpayer compliance generally found that higher levels of individual ethics are associated with greater taxpayer compliance. However, Jackson and Milliron[112]
noted that the significance of the relationship between ethics and compliance tended to vary depending on the particular definition of ethics adopted. The results of two major American studies suggested that taxpayer ethics play a crucial role in the compliance decision by controlling the extent to which a taxpayer is sensitive to situational influences. Further research into the mediating role of ethics in the compliance decision is required beyond the four situational variables currently identified.[113] This could also therefore have implications for deterrence via the situational variable of sanction levels.
Finally, a study by Torgler and Murphy[114] expanded further upon the analysis of taxpayer traits by investigating the typology of taxpayers to include the social, intrinsic, honest, and tax evaders. Social taxpayers are influenced by social norms such as guilt and shame and their compliance behaviour is conditional upon the actions of other taxpayers. The intrinsic taxpayers are sensitive to institutional factors that encourage them to comply. This group of taxpayers is the one to be most likely influenced by deterrence mechanisms. The other category of honest taxpayers are generally good responsible citizens that always do their best to comply with the tax laws regardless of the tax authority’s deterrence measures. Finally, at the opposite end there are exceptionally dishonest taxpayers (tax evaders): bad, irresponsible citizens, who have low tax morals, are reliant on economic choices, and are insensitive to deterrence measures.[115]
The social and psychology models of tax compliance indicate that it is vitally important to take into account the personality traits and characteristics of taxpayers. Based on Torgler and Murphy’s work, it would appear necessary to concentrate on the middle majority of (intrinsic) taxpayers — those in between the two extremes of taxpayers — who would be influenced most by deterrence measures.
In expanding the basic economic deterrence model and investigating the impact of demographics and other variables upon taxpayer compliance, from a deterrence perspective certain problems and limitations are nevertheless evident. Deterrence by its very nature is a complex and difficult concept. The number of people deterred from a particular criminal act cannot be measured directly in theory, and a number of other factors, including social, economic and political, also come into play, which ultimately impact upon the accuracy and reliability of various research methods employed. Controlling for these other factors is often difficult in both quantitative and qualitative terms, not to mention that both time and resources of researchers are generally limited and some research methods are incompatible.
Likewise deterrence research utilises a great variety of indices, including the commonly used index of the severity of punishment, the probability of apprehension and crime rates. Problems can arise in the use of some of the more important index variables. For instance, serious problems can arise without a common method of defining severity of penalty as an immediate step in the analysis of whether variations in the severity of punishment, over time or between locations, influence the incidence of crime.[116]
In particular, the proportion of actual offences that result in prison sentences is likely to be an extremely small fraction. It has been suggested that less than one percent of actual offences result in sentences, although this does vary from crime to crime.[117] It appears that if social science is going to provide useful information on the deterrent effect of sanctions, a much better appreciation of the effect of crime on criminal justice will also be required. The results of Nagin’s[118]
study make a strong case for the argument that the negative association between the index crime rate and imprisonment risk, which has been so thoroughly documented in the literature, is attributable to the negative effect of crime rate on imprisonment risk.
Also, the inclusion of some of the demographic variables to assist in the analysis of deterrence upon tax compliance raises certain problems and issues in itself. As indicated previously, some variables (such as the income variable) may have a distorting effect on other variables like nationality. Also, the use of different occupational and employment status categories in various studies has made it difficult to analyse the impact of this variable upon tax compliance. A similar issue is found in the education and qualifications variable when determining which aspect of education is being measured. The age and gender variables are affected by other compliance variables, and possibly when too many variables are utilised in a particular study it can mitigate the value of the overall findings.
Nevertheless, despite the foregoing problems and the issues raised here, it is suggested that an expanded version of the basic economic deterrence model incorporating those salient features of the social and psychology models would still be more effective in measuring an overall deterrent impact. Given that the research problem or underlying purpose of the research is to measure the deterrent effect and its impact upon taxpayer compliance, it appears that the basic economic deterrence model clearly fails in this regard.
As the underlying research is about people’s behaviour, the pure economic deterrence model would on its own neither fulfil the purpose of the research nor provide an adequate explanation of why people behave the way they do. This is supported by the literature, as many authors have concluded that very little is known about taxpayer behaviour.[119] While both the economic and the social and psychology models each have their advantages and disadvantages, the aim should be to draw upon the strengths of both in a complementary and cross-validating research approach. This will not only ensure that deterrence measures are revealed but also will, more importantly, reveal how taxpayers’ perceptions of deterrent measures are formed.
[∗] Senior Lecturer, Department of Business Law and Taxation, Monash University.
[1] The general thrust of neutralisation theory is that people who are able to eliminate feelings of guilt before engaging in acts of non-compliance are more likely to engage in such acts.
[2] M Richardson and A Sawyer, ‘A Taxonomy of the Tax Compliance Literature: Further Findings, Problems and Prospects’ (2001) 16 Australian Tax Forum 137, 153.
[3] B Tran-Nam, ‘Tax Compliance Research: An Economic Perspective’ (2003) 9 New Zealand Journal of Taxation Law and Policy 455, 466.
[4] C S Kenny, Outlines of Criminal Law (13th ed, 1929) 30.
[5] F E Zimring and G J Hawkins, Deterrence: The Legal Threat in Crime Control (1973) 72.
[6] J Bentham, Principles of Penal Law (1843) 392.
[7] See N Walker, Crime and Punishment in Britain (1965) 131.
[8] N Morris, ‘Impediments to Penal Reform’ (1966) 33 University of Chicago Law Review 632.
[9] Zimring and Hawkins, above n 5, 75.
[10] Ibid.
[12] Johannes Andenaes, ‘The General Preventive Effects of Punishment’ (1966) 114 University of Pennsylvania Law Review 949, 970; Morris, above n 8, 640.
[13] T Packer, The Limits of the Criminal Sanction (1968) 42.
[14] Andenaes, above n 12, 950.
[16] Andenaes, above n 12, 950.
[17] Franz Alexander and Hugo Staub, The Criminal, the Judge, and the Public (1956) 213.
[18] Morris, above n 8, 640. The exception referred to is the Greenland Criminal Code of 1962.
[19] California Assembly Office of Research, Crime and Penalties in California (1968).
[20] Zimring and Hawkins, above n 5, 22.
[21] By issuing tax rulings and media releases.
[22] Zimring and Hawkins, above n 5, 32.
[23] Ibid.
[24] Deterrence is peculiar in that it ignores the personal quality of the offender. See Temple, The Ethics of Penal Action (1934). See also G B Shaw, The Crime of Imprisonment (1946) 32–3:
[Deterrence] necessarily leaves the interest of the victim wholly out of account. It injures and degrades him, destroys the reputation without which he cannot get employment, and when the punishment is imprisonment under our system, atrophies his powers of fending for himself in the world.
[26] Zimring and Hawkins, above n 5, 47.
[27] Armen Alchian, ‘Cost’ in David Sills and Robert Merton (eds), International Encyclopaedia of the Social Sciences (1968) vol 3, 411, 411.
[29] Zimring and Hawkins, above n 5, 60.
[30] Andenaes, above n 12, 970.
[31] Ibid.
[32] Andenaes, above n 12, 970.
[33] For example, an empirical study of the California Penal Code by the County of Los Angeles in the United States of America revealed that, in a random sample of 493 defendants, 95 percent had the sentences for their offences downgraded.
[34] Zimring and Hawkins, above n 5, 67.
[35] Joseph Goldstein, ‘Police Discretion Not to Invoke the Criminal Process: Low-Visibility Decisions in the Administration of Justice’ (1960) 69 Yale Law Journal 543, 586–7.
[36] S Yong, ‘A Critical Evaluation of the Economic Deterrence Model on Tax Compliance’ (2006) 12 New Zealand Journal of Taxation Law and Policy 95.
[37] A D Cuccia, ‘The Economics of Tax Compliance: What Do We Know and Where Do We Go?’ (1994) 13 Journal of Accounting Literature 81, 90–1.
[39] C M Fischer, M Wartick and M M Mark, ‘Detection Probability and Taxpayer Compliance: A Review of the Literature’ (1992) 11 Journal of Accounting Literature 1, 44.
[40] B Erard, ‘Taxation with Representation: An Analysis of the Role of Tax Practitioners in Tax Compliance’ (1993) 52(2) Journal of Public Economics 163.
[41] F Fisher, The Identification Problem in Econometrics (1966).
[42] D Nagin, ‘Crime Rates, Sanctions Levels, and Constraints on Prison Population’ (1978) 12 Law and Society 341, 341.
[43] See generally Richardson and Sawyer, above n 2, 192–7; Zimring and Hawkins, above n 5, 224–48.
[44] A Blumstein, J Cohen and D Nagin (eds), Deterrence and Incapacitation: Estimating the Effects of Criminal Sanctions on Crimes (1978).
[45] Richardson and Sawyer, above n 2, 193.
[46] Ibid.
[47] Ibid. Some research has examined how sanction perceptions are related to other tax compliance variables, in particular age, gender and education.
[48] For example, social sanctions compared with legal sanctions.
[49] P Hite, ‘Identifying and Mitigating Taxpayer Non-Compliance’ (1997) 13 Australian Tax Forum 155.
[50] See the references cited by Richardson and Sawyer, above n 2.
[51] Taxpayer perceptions of the levels of the penalty can really only be measured in survey and experimental studies, with regression studies being restricted to the use of actual penalties.
[52] [1975] VR 292, 298–9.
[53] [1954] NZLR 86, 87.
[54] Yarldley v Betts (1972) 22 SASR 108, 112 (sentences they impose have the effect of deterring some people from committing crime).
[55] (Unreported, Supreme Court of Victoria, Court of Criminal Appeal, Starke, Anderson and Fullagar JJ, 5 February 1980).
[56] R v Ryan; Ex parte Attorney-General [1989] 1 Qd R 188, 190 (Carter J) (‘I remain unconvinced at the present time that to impose higher sentences on these two respondents will lead to a decrease in bank robbery or in the commission of offences of armed robbery generally’), 191 (Dowsett J) (‘there is no direct link between sentencing levels and deterrent effect’).
[57] Ibid 191 (Dowsett J) (doubting whether a sentence of 15 years would act as a greater deterrent than a sentence of 10–12 years).
[58] L Sebba, ‘Mitigation of Sentence in Order to Deter?’ (1980) 6 Monash University Law Review 268.
[59] [1977] HCA 44; (1977) 137 CLR 293, 327. See also R v Dixon (1975) 22 ACTR 13, 18–19.
[60] [1998] 2 VR 229. See also R v Martin (1994) 119 FLR 220. On the other hand white collar crimes often require less personal or specific deterrence, which indicates that a lesser sentence may be appropriate: see McDonald v The Queen (1994) 48 FCR 555.
[61] Director of Public Prosecutions (Cth) v El Karhani (1990) 21 NSWLR 370, 378.
[62] R v Knowles (1987) 45 SASR 14, 15–16. Green CJ observed in Pavlic v The Queen (1995) 83 A Crim R 13, 16 that
there is no justification for the view that there exists a direct linear relationship between the incidence of a particular crime and the severity of the sentences which are imposed in respect of it such that the imposition of heavier sentences in respect of a particular crime will automatically result in a decrease in the incidence of that crime.
[63] C Title and C Logan, ‘Sanctions and Deviance: Evidence and Remaining Questions’ [1973] Law and Society Review 371.
[64] R Mason and L D Calvin, ‘Study of Admitted Income Tax Evasion’ (1978) 13 Law and Society 77.
[65] Ibid.
[66] Title and Logan, above n 63, 375.
[67] S Karlinsky, S Burton and T Blanthone, ‘Perception of Tax Evasion as a Crime’ (2004) 2 eJournal of Tax Research 226.
[68] Richardson and Sawyer, above n 2, 197.
[69] Ibid.
[70] See the references cited by Richardson and Sawyer, above n 2, 202.
[71] J S Feinstein, ‘An Econometric Analysis of Income Tax Evasion and Its Detection’ (1991) 22 Rand Journal of Economics 14.
[72] See the references cited by Richardson and Sawyer, above n 2, 202.
[73] See the references cited at ibid 201.
[74] See the study by Feinstein, above n 71.
[76] B R Jackson and V C Milliron, ‘Tax Compliance Research: Findings, Problems and Prospects’ (1986) 5 Journal of Accounting Literature 125, 165.
[77] G A Carnes and A D Cuccia, ‘An Analysis of the Effect of Tax Complexity and Its Perceived Justification on Equity Judgements’ (1996) 18 Journal of the American Taxation Association 40.
[78] S B Long and J A Swingen, ‘The Role of Legal Complexity in Shaping Taxpayer Compliance’ in P J Van Koppel, D Hessing and G Van den Heuvel (eds), Lawyers on Psychology and Psychologists on Law (1988) 127.
[79] See the references cited by Richardson and Sawyer, above n 2, 187.
[80] M McKerchar, ‘The Effects of Complexity on Unintentional Non-Compliance for Personal Taxpayers in Australia’ (2002) 7 Australian Tax Forum 3.
[81] J G Cullins and A Lewis, ‘Why People Pay Taxes: From a Conventional Economic Model to a Model of Social Convention’ (1997) 18 Journal of Economic Psychology 305, 310–12.
[82] Common variables utilised in the social and psychology model include those that deal with taxpayer behaviour and attitudes, and demographics relating to internal and external social norms (for example, morals, fairness and efficiency of public spending).
[83] R Schwartz and S Orleans, ‘On Legal Sanctions’ (1967) 34 University of Chicago Law Review 274.
[84] Zimring and Hawkins, above n 5, 75.
[85] Richardson and Sawyer, above n 2.
[86] Jackson and Milliron, above n 76.
[87] P Oxley, ‘Women and Paying Tax’ in C Scott (ed), Women and Taxation (1993) 31.
[89] See, eg, H G Grasmick and R J Bursick, ‘Conscience, Significant Others and Rational Choice: Extending the Deterrence Model’ (1990) 24 Law and Society Review 837.
[90] Richardson and Sawyer, above n 2, 156.
[91] See, eg, K W Smith, ‘Reciprocity and Fairness: Positive Incentives for Tax Compliance’ in J Slemrod (ed), Why People Pay Taxes: Tax Compliance and Enforcement (1992) 223.
[92] See, eg, T M Porcano, ‘Correlates of Tax Evasion’ (1988) 9 Journal of Economic Psychology 47.
[93] Grasmick and Bursick, above n 89.
[94] Smith, above n 91, 223–50.
[95] J A Roth, J T Scholz and A D Witte (eds), Taxpayer Compliance: An Agenda for Research (1989) 21.
[96] K J Beron, H V Tauchen and A D Wittie, ‘The Effect of Audits and Socioeconomic Variables on Tax Compliance’ in J Slemrod (ed), Why People Pay Taxes: Tax Compliance and Enforcement (1992) 67.
[97] See, eg, Y Song and T Yarborough, ‘Tax Ethics and Taxpayer Attitudes: A Survey’ [1978] Public Administration Review 442.
[98] See, eg, Jackson and Milliron, above n 76, 125–65; Richardson and Sawyer, above n 2, 149; A Lewis, The Psychology of Taxation (1982) 127.
[100] Beron, Tauchen and Wittie, above n 96, 67.
[101] L K McGraw and J T Scholz, ‘Norms, Social Commitment and Citizens Adaptation to New Laws’ in P J Van Koppel, D Hessing and G Van den Heuvel, (eds), Lawyers on Psychology and Psychologists on Law (1988) 105.
[102] M L Roberts, ‘An Experimental Approach to Changing Taxpayers’ Attitudes: Towards Fairness and Compliance via Television’ (1994) 16 Journal of the American Taxation Association 67.
[104] Grasmick and Bursick, above n 89, 837.
[106] Grasmick and Bursick, above n 89.
[107] See, eg, Jackson and Milliron, above n 76, 161–5.
[108] See, eg, Porcano, above n 92; Beron, Tauchen and Wittie, above n 96.
[109] See, eg, Mason and Calvin, above n 64, 73. The authors’ occupational categories were: professional/technical; managers and officials (not self-employed); managers and officials (self-employed); clerical and sales; craftsman; operators; and unskilled.
[110] D J Hasseldine, S E Kaplan and L R Fuller, ‘Characteristics of New Zealand Tax Evaders: A Note’ (1994) 34 Accounting and Finance 79. The survey only included two categories: self-employed/sales/professional and clerical/administration/manual.
[111] H S J Robben, D J Hessing and H Elffers, ‘Legal Controls and Type of Employment in Tax Evasion Behaviour’ in E G Lea, P Webley and B M Young (eds), Applied Economic Psychology in the 1990s (1990) 1, 512.
[112] Jackson and Milliron, above n 76. See also Richardson and Sawyer, above n 2, 137–320.
[113] Namely opportunity, the probability of detection, tax rate and withholding status at year end.
[114] B Torgler and K Murphy, ‘Tax Morale in Australia: What Shapes It and Has It Changed over Time?’ (2004) 7 Journal of Australian Taxation 298.
[115] Tran-Nam, above n 3, 458.
[116] Zimring and Hawkins, above n 5, 327–38.
[117] L Wilkins, ‘Crime Prevention and Costs in National Planning: A Discussion of Concepts and Issues’ (1967) 25 International Review of Criminal Policy 23.
[119] See, eg, Long and Swingen, above n 78, 127–46.
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