1. How do Australians Think about Tax ? Valerie Braithwaite Regulatory Institutions Network ANU Public Perceptions: Making the Connection between Tax, Investment and Return, Per Capita Working Seminar, Canberra, 7 July 2009

2. Presentation Outline Thinking Complexly about Tax – Alive and Well in the Community Statistical Snapshots of What People Think About Tax and Democracy A Model to Guide Understanding of How the Public Engage with Tax Reform

3. 6 tax focused national mail surveys between 1999 and 2005 3 of these surveys tracked Australians responses to the tax reform process that saw the introduction of the goods and services tax (GST) 2000 survey was conducted pre-GST, 2001-2 survey was conducted after the GST came into effect in July 2001, 2005 survey was conducted after the reform process was bedded down Thinking Complexly about Tax

4. Post the 2005 Federal Budget, Taxpayers were Asked: Would the budget tax cuts make you financially better off? 7% thought they would be somewhat or much better off 28% thought they’d be a little better off 52% thought no better off, no worse off 13% didn’t know

5. Would the tax cuts make the tax system fairer ? 8% thought more fair 27% thought a little more fair 30% thought no difference 12% thought a little less fair 22% thought less fair

6. 28% Reduced taxes 13% Depends 59% Spent more on social services and infrastructure What should the government have done: reduced taxes or spent more on social services/infrastructure ?

7. Self-interest? A little, not much Political party identification? A little more, but not much Values and social goals for the democracy? Yes Drivers of attitudes to tax cuts or spending on social services and infrastructure?

8. Conclusion of these studies: The institutions of politics and the media crowd out and homogenize public views and engender helplessness and disinterest in the deliberative process Comparison with attitudes to GST: Self-interest not very important, values and goals were “squashed” by political identification

9. Do you think the tax you pay is fair given the goods and services you receive from government? 37%39%34% Would you prefer to pay less tax even if it means receiving a more restricted range of goods and services? 31%38%27% How satisfied are you with the way the government spends taxpayers’ money? 15% 21% 17% Snapshot Statistics of what Australians Think: How many Australians agree or say yes in 2000, 2002, and 2005 to questions on “value for money”?

10. I would be better off if I worked less given the rate at which I am taxed 31%29%26% Paying tax means I just can’t get ahead 28%29%29% Paying tax removes the incentive to earn more income 56%49%48% Snapshot Statistics of what Australians Think: How many Australians feel oppressed by taxation agreeing with the following in 2000, 2002 and 2005?

11. Do you think you should honestly declare all your tax earnings? 72%72%72% Yes Do you think it is acceptable to overstate tax deductions in your return? 8%7%6% Yes Do you think working for cash-in-hand payments without paying tax is a trivial offence? 32%31%28% Yes Snapshot Statistics of what Australians Think: How many Australians feel a moral obligation to pay tax in 2000, 2002 and 2005 ?

12. Democratic collective self: a self that expects government to deliver in exchange for our cooperation, an expectation of being respected as a citizen Competitive self: a self that aspires to wealth, power and status in some cases and to a job, family and home in others Moral self: a self that wants to be honest and seen to be honest, as law abiding, as not needing to be fearful of authority, a good person Conclusion: Tax reform in its outcomes and process needs to be respectful of these selves.

13. How is the Democratic Collective Self undermined ?

14. 86 40 87 38 85 48 020406080100 Disillusionment Freemarket Percent agree or strongly agree Tax HFHE (L) 2005 Hope 2003 Tax CHFAS 2000 A comparison of levels of disillusionment with Australian democracy and support for small government and free markets 2000 - 2005

15. 77 70 64 59 51 45 29 24 22 10 9 6 78 75 73 60 49 47 29 23 24 11 9 5 0102030405060708090 Chief executives Owner managers Senior judges and barristers Surgeons Doctors in general practice Tax agents and advisors Farm owners Small business owners Trades people Waitresses Farm labourers Unskilled factory workers Percent paying a bit less or much less than their fair share Tax ATSFONS Tax CHFAS Perceptions of the degree to which different occupational groups are paying their fair share of tax

16. Reform action% of utmost importance 2000 Ensure large corporations pay their share60 Get rid of grey areas of tax law40 Ensure wealthy pay more tax37 Make amount of tax paid by large corporations public34 Keep taxes as low as possible31 Broaden tax base30 Give corporation incentives to pay more tax29 Keep costs of administering the system down28 Make the system simpler25 Improve competitiveness of Australian business23 Look into a flat rate of tax16 Get rid of tax deductions8

17. Trust in Institutions Institution% trusting ‘a lot’ or ‘a fair bit’ 20022005 Insurance companies2420 Banks2934 Fed. government3830 Newspaper, TV35,4727,40 Law courts50 Tax authority6346 Local police station82 Local schools8379 Local hospitals8479

18. How is it being undermined? It hasn’t although it may be harder to “win” by being law abiding (Hypothesis). Opportunities for investment and prosperity have been high for those who have been able to take advantage of Australia’s favourable economic conditions. Negative relationship to moral obligation. Opportunities for tax minimization and avoidance have been available for those with wealth. Negative relationship to moral obligation. Opportunities for those aspiring to home, family and a good job have been less easily accessed by segments of the population. Negative relationship to moral obligation. Competitive Self

19. Imagine that you have to find a tax adviser. What would your ideal tax adviser be like? Would you give a top or high priority to some who is … Moral Self - How is it being undermined? Honest and offers a no fuss service 85%82%85% Good at minimizing tax without taking risks 30% 26%21% Willing to be aggressive in reducing the tax bill 24%20%20%

20. Imagine you are caught for tax evasion – not declaring $5,000 in income or claiming work deductions unlawfully worth $5,000. How would you feel if you were caught ? 60% in 2000 and 60% in 2002 said they were likely or certain to feel ashamed or guilty 8% in 2000 and 8% in 2002 said they were likely to feel angry with the tax office and express that anger 7% in 2000 and 8% in 2002 said they would just shrug it off and not worry too much about it

21. 92 73 55 6 13 72 57 7 10 92 74 57 5 11 94 020406080100 Commitment Capitulation Resistance Disengagement Gameplaying Percent agreement Tax HEHF (L) 2005 Tax ATSFONS 2001 Tax CHFAS 2000 Percent endorsing each motivational posture to Australian Taxation Office 2000 - 2005