Compliance essay cards Flashcards
Hanlon et al 2010
Tax planning, avoidance and evasion can be viewed as a continuum.
Aggressive measures of avoidance may contravene the spirit of the law
Tax Morale (OECD 2024)
Higher in countries that tax more heavily
Age, education, Gender, religion and trust in government all influence tax morale
How is the UK tax gap analysed? (3)
tax type
taxpayer groups
behaviour
Why do tax payers comply?
- Economic models of compliance - Allingham & Sandmo
- Behavioural (Psychological and sociological) - Kirchler 2007
- Interdisciplinary Approaches (Boll 2014)
Objectives of tax administrations
- Collect right amount of tax at right time
- Make it easy to get tax right (Make Tax Digital scheme)
- maintain taxpayers consent through fair treatment and protect society from harm
- Make HMRC a great place to work
- Support wider government economic aims through a resilient, agile tax system
HMRC key decisions to support objectives
- Focus on our customers (5 clear customer groups, large, mid and small businesses, individuals, wealthy)
- Promoting compliance and preventing non-compliance
- Reduce likelihood of disputes
Slippery Slope framework (Kirchler 2007)
Levels of power and trust in authorities lead to certain level in compliance (enforced –> voluntary)
Approaches to tax administration (5)
- Adversarial
- Behavioural
- Informing
- Reciprocity
- Cooperative compliance
Adversarial approach to tax admin
‘Cops and robbers’
- Posting details of deliberate tax defaulters
- penalties and enforcement (gets worse with the more non compliance eg higher penalties)
Behavioural approach to tax admin
‘Psychological nudging’
- Wording of HMRC letters sent to different groups of taxpayers
- Massages referring to public services or financial info significantly increased payment rates
- Accelerated collection at little cost
Informing approach to tax admin
Taxpayer education
eg Youtube videos
Reciprocity approach to tax admin
understanding what tax payers receive in return
-Publicly post annual tax summary outlining gov expenditure
Co-operative compliance approach to tax admin
Shift in thinking towards more responsive and collaborative approach instead of deterrence
- Maintain relationships
- classify customers into risk levels to allocate resources accordingly
- requires good communication
Emphasis on transparency, trust and collaberation
Australian taxation office compliance model
Continuum of client attitudes towards compliance. Base of continuum clients willing to do right thing, make it easy for them. At other extreme clients decide not to comply, where full force of the law applies.
-Considered fairly heavy handed
Legislative responses to address compliance problems
GAAR
Disclosure of tax avoidance schemes
Cooperative compliance
Senior accounting officer
Publish your tax strategy
Actor-Network Theory
Boll 2014
interactions between people and non-human elements. Socio-material assemblage.
More realistic
Problem with implementing cooperative compliance
Larsen 2021
Cooperative compliance depends on the relationship between tax administrators and payers, as well as cultural and social contexts of each country
Tax gap by tax type
35% Income, NICs and CGT. (£12.7bn)
Second is corporation tax at 30% (£10.6 bn)
Tax gap by taxpayer group
Small business is highest 56%
followed by criminals and other businesses.
Tax gap by behaviour type
Failure to take reasonable care 30%
Error in accounts second 15%
Evasion is third 13%
Recent changes to non dom rules
- George Osbourne claimed reforms would generate £1.5bn but didnt happen. (Mark Davies 2019) boil a frog
- Warwick University 2022 suggested scrapping non dom would raise more than 3.2.
Real partnership case
2016 Remi Ashton v HMRC
Tax administrations
Implement the tax law. Deal with taxpayers and collect the tax that is due
