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

2. 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
Tax Morale in Norway and elsewhere
4/23/2017

3. Deterrence: The effect of audit
General level
Other tax payers
Audits have a positive effect
Studie på baggrund af compliance målinger (nix-pille sagerne)
Brev sendt til både kontrollerede og ikke-kontrollerede skatteydere
effekten var størst på dem der ikke tidligere var blevet kontrolleret
Kontrol fremstår mere skræmmende når man ikke har prøvet det!
Individual level
Audited tax payers
Potential negative effect on compliant tax payers
Potential negative effect on non-compliant tax payers
Potential positive effect on non-compliant tax payers
Tax Morale in Norway and elsewhere
4/23/2017

4. 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
Tax Morale in Norway and elsewhere
4/23/2017

5. Elements influencing taxpayer compliance
Public spending efficiency
Tax morale
Economy
Deterrence
Revenue authority
behavior shows fairness
Opportunity
Tax Morale in Norway and elsewhere
4/23/2017

6. 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
Tax Morale in Norway and elsewhere
4/23/2017

7. Tax morale – where does it come from?
Industry
Neigbours, friends, idols, general public
Staff
Trade unions
Competitors
Revenue body
Media
Software suppliers
Accountants
Tax Morale in Norway and elsewhere
4/23/2017

8. 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
Tax Morale in Norway and elsewhere
4/23/2017

9. 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
Tax Morale in Norway and elsewhere
4/23/2017

10. 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
1980
1989
2001
Yes
78%
67%
61% No 6% 9%
13%
Neither yes or no
20%
Don’t know 3% 2%
Tax Morale in Norway and elsewhere
4/23/2017

11. Empirical results – Norway and elsewhere
Source: World Values Survey (1993)
Tax Morale in Norway and elsewhere
4/23/2017

12. Comparisons across tax administrations
DETERRENCE EFFECTS OF AUDITS
ECONOMY
OPPOR-TUNITIES
FOR TAX EVASION
PUBLIC SPENDING
EFFICIENCY
RA DEALINGS WITH
TAXPAYER
TAX MORALE
NTA
UNCERTAIN
GOOD
SMALL
HIGH
MOSTLY
FLEXIBLE AT ?
TRA
ZRA
Tax Morale in Norway and elsewhere
4/23/2017

13. How do taxpayers perceive the Tax Agency?
Tax Morale in Norway and elsewhere
4/23/2017

14. Complex interactions between different compliance factors
High level of voluntary compliance
Personal norms &
deterrence
Works well if the deterrence is perceived as supportive.
Procedural fairness important.
Only personal norms
Works well because personal norms have great influence on behaviour.
Only deterrence
Deterrence can replace the personal norm. That is a weaker incentive.
Nothing
Does not work well.
Low level of voluntary compliance
Tax Morale in Norway and elsewhere
4/23/2017

15. 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
Tax Morale in Norway and elsewhere
4/23/2017

16. 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?
Tax Morale in Norway and elsewhere
4/23/2017