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Tax Morale in Norway (and elsewhere) – flexible or firm? Presentation for the seminar in Lusaka April 2012.

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Presentation on theme: "Tax Morale in Norway (and elsewhere) – flexible or firm? Presentation for the seminar in Lusaka April 2012."— Presentation transcript:

1 Tax Morale in Norway (and elsewhere) – flexible or firm? Presentation for the seminar in Lusaka April 2012

2 10/5/2015Tax Morale in Norway and elsewhere2 Some results from academic research Economic view of man (homo economicus): deterrence (the risk of getting caught and the size of the punishment) is the sole influencing factor on compliance Problematic view: does not explain the high level of voluntary compliance given that risks are small and penalties relatively small

3 10/5/2015Tax Morale in Norway and elsewhere3 General level Other tax payers Individual level Audited tax payers Audits have a positive effect Potential negative effect on compliant tax payers Potential positive effect on non-compliant tax payers Potential negative effect on non-compliant tax payers Deterrence: The effect of audit

4 10/5/2015Tax Morale in Norway and elsewhere4 More influencing factors according to research Opportunity (sometimes) makes thief Inefficient public spending lowers compliance Norms (“tax morale”) influences compliance RA dealings with the taxpayer has an impact State and structure of the economy

5 10/5/2015Tax Morale in Norway and elsewhere5 Elements influencing taxpayer compliance Tax morale E conomy D eterrence O pportunity Revenue authority behavior shows fairness Public spending efficiency

6 10/5/2015Tax Morale in Norway and elsewhere6 Definition of tax morale The norms of behavior governing citizens and businesses in their relationship with government and its revenue body In other words: Tax morale describes the moral principles or values individuals hold about paying their or their employers tax Tax morale is not to be treated as a black box Mechanisms must be identified that shows how tax morale might arise or how it might be maintained

7 10/5/2015Tax Morale in Norway and elsewhere7 Tax morale – where does it come from? Trade unions Media Software suppliers Industry Neigbours, friends, idols, general public Staff Competitors Accountants Revenue body

8 10/5/2015Tax Morale in Norway and elsewhere8 Factors influencing tax morale According to econometric research: Significant trust between taxpayers and revenue body level of religiousness age gender marital status Not significant: income education level

9 10/5/2015Tax Morale in Norway and elsewhere9 My personal list of factors that lowers tax morale personal norms have priority over public norms no bad consciousness when breaking rules strong individualism – “self-made man” way of thinking free-riding attitudes defeat sense of public duty “everyone does it” – generally accepted not to pay tax unclear what is right or wrong - creates moral nihilism feeling of being unfairly treated by the revenue body

10 10/5/2015Tax Morale in Norway and elsewhere10 Empirical results - Norway A survey from 2001 asked the following question (was also asked in 1980 and 1989): Do you think it is understandable that people do illicit work? Answer Yes78%67%61% No6%9%13% Neither yes or no 13%20% Don’t know3%2%6%

11 10/5/2015Tax Morale in Norway and elsewhere11 Empirical results – Norway and elsewhere Source: World Values Survey (1993)

12 10/5/2015Tax Morale in Norway and elsewhere12 Comparisons across tax administrations DETERRENCE EFFECTS OF AUDITS ECONOMYOPPOR- TUNITIES FOR TAX EVASION PUBLIC SPENDING EFFICIENCY RA DEALINGS WITH TAXPAYER TAX MORALE NTA UNCERTAINGOODSMALLHIGHMOSTLY GOOD FLEXIBLE AT ?????? TRA ?????? ZRA ??????

13 10/5/2015Tax Morale in Norway and elsewhere13 How do taxpayers perceive the Tax Agency?

14 10/5/2015Tax Morale in Norway and elsewhere14 Complex interactions between different compliance factors Personal norms & deterrence Only personal norms Only deterrence Nothing High level of voluntary compliance Low level of voluntary compliance Works well if the deterrence is perceived as supportive. Procedural fairness important. Works well because personal norms have great influence on behaviour. Deterrence can replace the personal norm. That is a weaker incentive. Does not work well.

15 10/5/2015Tax Morale in Norway and elsewhere15 Conclusions A strong tax morale enhances compliance Tax morale is maintained and improved by revenue body behavior less threatening, more understanding. more efficient cooperating with good forces in society involving communities, industry organizations, trade unions general attitude to paying taxes build a sense of citizenship the quantity and quality of public goods repair potholes and improve bad schools

16 10/5/2015Tax Morale in Norway and elsewhere16 Some discussion points Is it possible to measure the tax morale level? If yes, how? Do you believe that the tax morale in your country is firm or flexible? What can you as a tax administration do to improve the tax morale in your country?


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