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Erich Kirchler University of Vienna, Austria ICAP-Paris - 2014 Tax Psychology (4) Segmentation: age, gender, income, education and self- employment.

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Presentation on theme: "Erich Kirchler University of Vienna, Austria ICAP-Paris - 2014 Tax Psychology (4) Segmentation: age, gender, income, education and self- employment."— Presentation transcript:

1 Erich Kirchler University of Vienna, Austria ICAP-Paris Tax Psychology (4) Segmentation: age, gender, income, education and self- employment

2 Differential perspective Taxpayers should not all be lumped together and perceived as a homogeneous group: they find themselves in various situations, have developed different personal values, prove generous when there are calls for donations for the socially disadvantaged or those effected by catastrophes, and often have a decided sense of community.

3 View of humankind: Social beings with different motivational postures Education strategies: responsive regulation Differential perspective(s) - segmentation

4 Tax authority Government Taxpayers Individuals characterized by motivational postures Segmentation and responsive regulation View of system: Authorities Differential perspective(s) - segmentation

5 Person: Opportunity makes the thief Socio-demographic characteristics: age, gender, education, income, etc. … Religion, personal norms, personality characteristics, etc.

6 Right and left hand with Canon Scanner Digital measuring of R2D, R4D, L2D, L4D (digital vernier caliper; 0.01 mm) Age Sex (assessing 2D:4D) Repetition of measurement after two days ICC =.975 –.999 (F = – ; df1 = 106; df2 = 106, p <.001)

7 Tax compliance by sex ♂ M(SD) = (52.42) ♀ M(SD) = (48.95) t(104) = 2.86, p <.01

8 Demographic segmentation Meta-analyses of effects of socio-demographic characteristics (Hofmann, E. et al., 2014) Approximately 459 studies; 570,000 participants Age: Studies: 416 (mainly EVS, ISSP, Latinobarometro, WVS) N = 550,870 r =.12*** Sex:Studies: 459 (mainly ESS, EVS, ISSP, Latinobarometro, WVS) N = 570,408 r =.06*** Education: Studies: 342 (mainly EVS, ISSP, Latinobarometro, WVS) N = 439,099 r = -.02*** Income: Studies: 340 (mainly EVS, ISSP, WVS) N = 390,902 r = -.04***

9 99 BLUE COLLAR WORKERS Public deficit Criticism of the government Associations to taxes of entrepreneurs, civil servants, students, white, and blue collar workers (explained variance: Dimension 1 = 38%; Dimension 2 = 30%; Dimension 3= 17%; Kirchler, 1998) Dimension 2 Dimension 3 Dimension Lack of clarity Technical tax terms Economic regulator STUDENTS ENTREPRE NEUERS Not categorized Bureaucracy Names of politicians and political institutions Punishment and disincentive Tax evasion Necessary evil Social security WHITE COLLAR WORKERS Social welfare Social justice CIVIL SERVANTS Salary and income Financial loss Criticism of politicians Instrument for politicians Publicgoods Public constraint STUDENTS ENTREPRE NEUERS WHITE COLLAR WORKERS

10 10 Structural relationship between duration of running a business, age of respondents, perceived limitation of freedom, attitudes towards taxes, tax morale and intention to evade (Kirchler, 1999) Duration of business in years Age Intention to evade Tax morale Attitudes towards taxes Perceived limitation of freedom

11 Lozza, E., Kastlunger, B., Tabliabue, S. & Kirchler, E. (2013). The relationship between political ideology and attitudes toward tax compliance: The case of Italian taxpayers Research on tax behaviour has given little attention to taxpayers’ political affiliations when studying attitudes towards tax evasion. The present paper aims to explore the relationship between political party preferences and attitudes toward tax compliance within the “slippery slope framework”. Results deriving from mixed-method research conducted in Italy with self-employed taxpayers show significant differences between left-leaning and right-leaning taxpayers in terms of attitudes toward tax evasion. Findings describe two different paths, one for each political affiliation, that might lead to higher levels of tax compliance, as well as different meanings and values attached to tax behaviours. In particular, left-leaning voters express higher voluntary cooperation and show reactance to power of authorities, whereas right-leaning voters, who express higher levels of enforced tax compliance, are more sensitive to enhancement of their voluntary cooperation, by increasing their trust in authorities and institutions.

12 Trust Legitimate power Coercive power Enforced compliance Voluntary compliance Tax evasionN=108N=164 Tax evasion Enforced compliance Voluntary compliance Trust Legitimate power Coercive power Left Right.67**.45**.62**.35** -.26*-.25*.28**.12.30**.16* -.18* **.13.42**-.29*.18*.39** * Lozza et al. (2013): Political party preference and tax behavior

13 Mental accounting of self-employed taxpayers On the mental segregation of the net income and the tax due Stephan Muehlbacher & Erich Kirchler University of Vienna Faculty of Psychology: Department of Applied Psychology: Work, Education, Economy

14 Mental accounting of taxpayers Gains Losses Value + -x - Should I evade taxes? Gains Losses Value + -x - Should I evade taxes?   Integration Segregation

15 Study 1: Interviews wit h self-employed taxpayers

16 Field manual 1.Topic of this interview is money management. Please tell me something about your revenues and expenditures in your company. How are these composed and how do you administer them? 2.When you have mentioned your expenditures you have mentioned (did not mention) taxes. Please tell me about your experiences with taxes and how you are handling them. 3.If you think about the very beginning of your career als self-employed: what has changed since then regarding you money mangement? 4.Did anything change regarding how you administer your taxes? 5.How and when in your career did you first deal with taxes and their administration? 6.If you think about your everyday business: in which situations are you confronted with tax issues? When do taxes cross your mind?

17 Main findings 90 Statements expressing segregation of net income and taxes: –„Actually taxes are not really costs for my company, because we are only taking them and administer them for the government.“ –„The money I pay as taxes has never been my money“ –„I put the money for paying taxes on an extra bank account“ 16 Statements expressing integration of net income and taxes: –„When I earn something I do not really think about the taxes i‘ll have to pay. “ –„I cannot pay them more than half of my income [as taxes]! “

18 Study 2: Construction of a scale to measure integration vs segregation

19 Purpose –Developing a scale to measure mental integration vs. segregation of net income and tax liability –Exploring antecedents and consequences of mental integration

20 Scale development 17 raw items for the mental accounting scale –37 statements from own interviews – 5 statements from interviews by Adams and Webley (2001) – Revised and summarized by a group of 5 experts  Resulting in 17 items to form a 7-point Likert-scale Excluding 7 items – 4 items were dropped due to ceiling-effects (Md=1 or 7) – 3 items were due to low inter-item correlations (all r<.3) Factor analysis with remaining 10 items

21 Scale development: Factor loadings (oblimin rotation) Items I λ=3.18 II λ=1.34 III λ=1.07 Mma08 When planning my sales at the beginning of a year, I already think about how much the fixed costs and the tax liability will be,798,118-,084 Mma07 When I earn some money I automatically think about the incidental taxes,690,000,146 Mma06 When doing my cost estimations I am always thoroughly computing how much exactly remains for myself after paying my fixed expenses and income tax,667-,042,202 Mma12 I know relatively well, how much money I have to put aside for paying my income tax,657,042-,124 Mra02 I always put some money aside for the case the tax office claims additional payments,521-,269,086 Mma09 Instantly after a customer has paid me, I am mentally deducting roughly the amount I will have to pay as taxes later on,501-,277-,050 Mra04 I think it is essential to put aside an appropriate amount of money extra for the income tax,013-,800-,054 Mra03 In my experience it makes sense to have a separate bank account to put aside something for the income tax,050-,770,071 Mbn17 I never really look upon the money I pay as income tax as my money,133,191,841 Mbn15 The income tax virtually is money we are looking after for the government, my customers are paying it -,127-,231,765

22 Scale development: Labeling and reliability Items I λ=3.18 II λ=1.34 III λ=1.07 Mma08 When planning my sales at the beginning of a year, I already think about how much the fixed costs and the tax liability will be,798,118-,084 Mma07 When I earn some money I automatically think about the incidental taxes,690,000,146 Mma06 When doing my cost estimations I am always thoroughly computing how much exactly remains for myself after paying my fixed expenses and income tax,667-,042,202 Mma12 I know relatively well, how much money I have to put aside for paying my income tax,657,042-,124 Mra02 I always put some money aside for the case the tax office claims additional payments,521-,269,086 Mma09 Instantly after a customer has paid me, I am mentally deducting roughly the amount I will have to pay as taxes later on,501-,277-,050 Mra04 I think it is essential to put aside an appropriate amount of money extra for the income tax,013-,800-,054 Mra03 In my experience it makes sense to have a separate bank account to put aside something for the income tax,050-,770,071 Mbn17 I never really look upon the money I pay as income tax as my money,133,191,841 Mbn15 The income tax virtually is money we are looking after for the government, my customers are paying it -,127-,231,765 I. Mental Accounting (6 items, α =.76, M=4.11, SD=1.35) I know relatively well, how much money I have to put aside for paying my income tax II. Real Accounting (2 items, α =.53, M=4.12, SD=1.67) In my experience it makes sense to have a separate bank account to put aside something for the income tax III. Tax money ≠ my money (2 items, α =.52, M=4.10, SD=1.74) I never really look upon the money I pay as income tax as my money

23 Scale development: Correlations between sub-scales Mental accounting (α =.76) Real accounting (α =.53) tax money ≠ my money (α =.52) Mean score (α =.75) Mental accounting -r =.69** Real accounting r =.39**-r =.76** tax money ≠ my money r =.21**r =.22**-r =.70** Note: * p ≤.05, ** p ≤.01

24 Antecedents of integration vs segregation Mental accounting Real accounting tax money ≠ my money Mean score BranchesF(1,167) = 1.45F(1,167) = 2.06F(1,167) = 0.72F(1,167) = 1.24 Staff sizerho = -.20**rho = -.03rho = -.09rho = -.15* Sext(170) = -0.21t(170) = 0.38t(170) = 1.61t(170) = 0.92 Incomerho =.10rho =.17*rho = -.02rho =.11 Experiencerho = -.03rho = -.00rho =.05rho =.02 Ager =.06r =.10r =.17* Note: * p ≤.05, ** p ≤.01

25 Consequences of integration vs segregation Tax morale (motivational postures, Braithwaite, 2003) positive: Deference (4 items, α =.75) negative: Defiance (6 items, α =.46) Reactance (Kirchler, 1999, 2 items, r =.53**, α =.69) Tax evasion scenarios (Kirchler & Wahl, 2010, 5 items, α =.79) Tax avoidance scenarios (Kirchler & Wahl, 2010, 5 items, α=.61) Self reported tax behavior ( Have you ever tinkered with the idea to evade taxes? yes/no ) * p ≤.05 ** p ≤.01

26 Consequences of integration vs segregation Mental accounting Real accounting Income tax was never my money Mean score Deference (positive) r =.20**r =.17*r =.23**r =.28** Defiance (negative)r =.00r =.05r = -.03r =.01 Reactance motives r = -.15*r =.04r = -.13 (p=.08)r = -.11 Note: * p ≤.05, ** p ≤.01

27 Consequences of integration vs segregation Tax Evasion Scenarios BSE (B)β Mental accounting– –.17* Real accounting Tax money ≠ my money Mean Score Note: All predictors are z-transformed, all tolerance values >.82, * p ≤.05, ** p ≤.01

28 Consequences of integration vs segregation Self reported tax behavior ( Have you ever tinkered with the idea to evade taxes? yes/no ) βSE (β)Odds-ratioWald test Mental accounting * Real accounting Tax money ≠ my money Mean Score * Note: All predictors are z-transformed, all tolerance values >.82, * p ≤.05, ** p ≤.01

29 Consequences of integration vs segregation Tax Avoidance Scenarios BSE (B)β Mental accounting ** Real accounting ** Tax money ≠ my money Mean Score ** Note: All predictors are z-transformed, all tolerance values >.82, * p ≤.05, ** p ≤.01

30 Summary of findings Age Income Staff size Tax morale Reactance Tax evasion Tax avoidance Segregation


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