The federal income tax system in the United States depends upon a high degree of voluntary compliance. The IRS estimates that the voluntary compliance level is declining and that this tax compliance gap cost the government an estimated $90.5 billion in 1981. Between 1979 and 1982, Congress made several changes in the tax laws designed to improve tax compliance. Extensive data was collected by the IRS for 1979 and 1982 through the random sample audits of approximately 50,000 taxpayers on the Taxpayer Compliance Measurement Program (TCMP), which is conducted every three years. During the period 1979 through 1982, Congress lowered the marginal tax rates, added some fairly severe penalties, for both taxpayers and paid return preparers, and increased information reporting requirements for certain types of income. In this research, it was hypothesized that voluntary compliance should increase in response to lower marginal rates, a higher risk of detection due to additional reporting requirements, and increased penalties. Multiple regression analysis was employed to test these hypotheses, using 1979 and 1982 TCMP data. Because of the requirements for taxpayer confidentiality, it was necessary for the IRS to run the data and provide the aggregate data results for the research. The results provided insight into the effectiveness of tax compliance legislation. While the overall voluntary compliance level (VCL) increased from 1979 to 1982 by 1.53 per cent, the VCL increase for taxpayers in high marginal rates was much smaller (.42 percent) than the overall increase. This is very inconsistent with the notion that high marginal rates are driving noncompliance, and suggests that marginal rates may not be strong determinants of compliance. Probably other factors, such as opportunity for evasion, may be more important. There was little change from 1979 to 1982 of the compliance of returns done by paid return preparers. Because of the timing of many TEFRA provisions (effective in 1983), further research for years after 1982 is needed.

Tax evasion is a serious issue that influences governmental revenues, IRS enforcement strategies, and tax policy decisions. While audits are the most effective method of enforcing compliance, they are expensive to conduct and the IRS is only able to audit a fraction of the returns filed each year. This suggests that audits alone are not sufficient to curb the billions of dollars of tax evaded by taxpayers each year and that a better understanding of factors influencing compliance decisions is needed to enable policymakers to craft tax policies that maximize voluntary compliance. Prior research tends to model compliance as economic, environmental, or personal decisions; however, this study models it as a multifaceted decision where these three perspective individually and interactively influence compliance. It is the first to decompose perceived detection risk into two dimensions (selection risk and enforcement risk) and investigates how these two dimensions of risk, decision domains (refund or tax due positions), and three personal factors (mental accounting, narcissism, and proactivity) influence taxpayers’ compliance decisions. I conducted a 2x2 fully crossed experiment involving 331 self-employed taxpayers. These taxpayers have opportunities to evade that employed taxpayers do not. For example, they can earn cash income that is not reported to the IRS by third parties. For self-employed taxpayers (especially those wanting to evade), perceived selection and enforcement risks may be distinctly different depending on a taxpayer’s situation, what they believe they can control, and what risk they are willing to accept. For example, selection risk may be perceived as the greatest risk for those with unreported items on their return, while enforcement risk may be more prominent for those perceiving certain levels of selection risk. Thus, I believe self-employed taxpayers are the most appropriate population to sample from and are likely have reasonable variation in the three personal factors of interest. I find that taxpayers do differentiate between selection and enforcement risks but the difference only manifests for taxpayers in certain decision domains. Taxpayers in a refund position (i.e. conservative mindset) had a greater sensitivity to the form of payment (cash vs. check) and appeared to use this information to make inferences about enforcement risk which was significantly different from their perceptions of selection risk. Conversely, tax due taxpayers (i.e. aggressive mindset) appeared to overlook the form of payment and did not assess these two risks as significantly different. Evaluating the full sample suggests that both selection risk and enforcement risk have a positive influence on compliance. Further, these risks interact to influence compliance. Specifically, compliance is greatest when taxpayers perceive a high likelihood of being selected for an audit and enforcement risk only matters when selection risk is low. This finding is interesting and suggests that avoiding interaction with the IRS is a primary objective of taxpayers. In line with my findings of taxpayers perceiving different risks in refund and tax due positions, the influence of risk perceptions on compliance differed for taxpayers in these positions. Refund taxpayers were influenced by both selection and enforcement risk, similar to the full model; however, tax due taxpayers were only influenced by selection risk and appeared to completely overlook enforcement risk when making their reporting decision. Lastly, the study shows that personal characteristics can also influence compliance in the presence of economic and environmental determinants, but some characteristics only manifest in specific decision domains. Of the three personal characteristics investigated, only mental accounting orientation was a significant predictor for the full sample. When the sample was split by decision domain, only proactivity was a predictor of compliance for refund taxpayers, while only mental accounting orientation was a predictor of compliance for due taxpayers. While I did not find results for narcissism and compliance, my subsequent analysis suggests that individual dimensions of narcissism may be better predictors of compliance than the full measure. Specifically, the exploitation dimension was a significant predictor of compliance for those in a tax due position. This study make several contributions to the accounting and tax literatures. First, this study provides support for a two-construct conceptualization for perceived detection risk that includes both selection and enforcement risks. Second, it answers calls to investigate more comprehensive compliance models and finds economic, environmental, and personal characteristics individually and interactively influence compliance. Third, this study investigates three personal factors that have not been investigated in the tax compliance literature. Finally, this study answers calls for research on self-employed taxpayers and suggests that the IRS will be more successful in increasing compliance by playing on taxpayers’ aversion to being selected for an examination than communicating information on the IRS’ ability to detect noncompliance during an examination.

The main goal of this thesis is to provide a sociologically informed analysis of tax avoidance and tax evasion in contemporary Mexico and Sweden, focusing particular attention on the explanatory role of social networks, social interactions, and positive feedback mechanisms. Two major data sources are used: (1) A panel dataset that includes all persons, 16 years or older, who resided in Stockholm County during at least one of the years 1990 to 2003 (N=1,967,993). The dataset includes detailed information on the socio-demographic characteristics, kinship networks, and criminal offences of these individuals; (2) A random sample of 36,949 firms that appeared in the Mexican Federal Register of Taxpayers for the year 2002. The records of the Mexican Federal Administrative Fiscal Tribunal provided data on all types of tax claims appealed before them during the 2002-2008 period. A variety of approaches and techniques are used such as agent-based simulation models, discrete time event history models, random effect logit models, and hierarchical linear models. These models are used to test different hypotheses related to the role of social networks, social interactions, and positive feedback mechanisms in explaining tax behaviour. There are five major empirical findings. (1) Networks seem to matter for individuals' tax behaviour because exposure to tax crimes of family members appears to increase a person’s likelihood of committing a tax crime. (2) Positive feedback mechanisms appear relevant because if a person commits a tax crime, it seems to increase the likelihood that the person will commit more tax crimes in the future. (3) Positive feedback mechanisms are also important for explaining corporate tax behaviour because a firm that has engaged in legal tax avoidance in the past appears to be more likely to engage in tax avoidance in the future. (4) Network effects are important in the corporate world because exposure to the tax avoidance of other firms increase the propensity of a firm to engage in tax avoidance. (5) Substitution effects between tax evasion and tax avoidance are likely to exist because when tax evasion becomes more prevalent in a firm’s environment, their likelihood of engaging in legal tax avoidance is lowered. The results underscore the importance of a sociological perspective on tax behaviour that takes into account social interactions and positive feedback mechanisms. In order to understand microscopic as well as macroscopic tax evasion patterns, the results presented in this thesis suggest that much more attention must be given to mechanisms through which taxation crimes breed more taxation crimes.

University of Macau / Faculty of Law

The study aims to review the regulatory powers exercised by the South African Revenue Services (SARS) with regard to the issuing, decline or revocation of a taxpayer’s tax clearance certificate, to highlight any remedial measures and procedures available to the aggrieved taxpayer in order to protect the right of taxpayers to fair administrative action in their dealings with SARS. Previously, a tax clearance certificate was not issued in terms of any statute or provision of any Tax Act. However, since the introduction of the Tax Administration Act, as amended (TAA), the issuing of the tax clearance certificates are more efficiently regulated. The issuing of tax clearance certificate’s must conform to the values and principles prescribed for under current legislation, and more particularly, as espoused under the Constitution of South Africa, 1996 (the Constitution). However, it has been reported some taxpayer were experiencing unreasonable and incomprehensible delays in obtaining responses to the objections lodged with SARS for assessment. Taxpayers seeking resolution of their disputes with SARS, currently opt to incur litigation costs in order to obtain appropriate relief from the High Courts. Taxpayers must take note that there is nothing in Promotion of Administrative Justice Act (PAJA) or the common law, which empowers a Court to order an administrator to take action, including the making of a decision which the administrator is not lawfully allowed to make. The study highlights remedial measures and procedures available to the aggrieved taxpayer to prevent the misapplication of fiscal power by SARS in the issuing of the taxpayer’s compliance status, thus protecting the right to fair administrative action in their dealings with SARS. Taxpayers who are aggrieved by a decision taken by the Revenue Authority are encouraged to timeously address their grievances, commencing with the internal dispute resolution remedies provided for within the TAA. / Financial Accounting / M. Compt. (Accounting Sciences)

Centre for Accounting Studies / M. Phil. (Accounting Science with specialization in Taxation)

This research examined the legal nature of the presumption of guilt created by section 235(2) of the South African Tax Admiration Act and considered whether or not its practical application violates the taxpayer’s fundamental right contained in section 35(3) of the Constitution, which gives every accused taxpayer the right to a fair trial, including the right to be presumed innocent. The research also provided clarity on the constitutionality of this presumption because it has been widely criticised for unjustifiably violating the taxpayer's constitutional right to a fair trial. The conclusion reached is that the presumption created by section 235(2) of the Tax Administration Act constitutes an evidentiary burden rather than a reverse onus. It does not create the possibility of conviction, unlike a reverse onus where conviction is possible, despite the existence of a reasonable doubt. Therefore, it does not violate the accused taxpayer’s the right to a fair trial and the right to be presumed innocent and hence it is constitutional. Accordingly, the chances that the accused taxpayer will succeed in challenging the constitutionality of section 235(2) of the Act are slim.

Prior to 1994, South African taxpayers had little protection from fiscal legislation or the decisions, actions or conduct of the South African Revenue Service (“SARS”) that violated their common law rights. Parliament reigned supreme and in tax matters, the strict and literal approach to the interpretation of statutes was employed, with the judiciary often quoting the mantra that there is “no equity about tax”. The Income Tax Act (Act No 58 of 1962) was littered with discriminatory and unfair provisions based on age, religion, sex and marital status. Even unreasonable decisions taken by SARS could not be reviewed by the judiciary as “unreasonableness” was not a ground for review of the exercise of a discretion by SARS. On 27 April 1994, the constitutional order changed. Parliamentary supremacy was replaced with constitutional supremacy and the rights to privacy, equality, human dignity, property and just administrative action were codified in a Bill of Rights. The codification of these fundamental rights has materially changed the nature and extent of the rights of South African taxpayers. The objective of this thesis, therefore, is to identify, analyse and discuss South African taxpayers’ rights from a constitutional perspective. The following major conclusions can be drawn from the research done: - the judiciary have been forced to reappraise their approach to the interpretation of statutes from a “strict and literal” to a “purposive” approach that is in accordance with the values underpinning the new constitutional order; - new legislation has amended some of the so-called “reverse” onus of proof provisions that were constitutionally unsound – this should result in greater fairness and consistency for affected taxpayers especially in the area of when penalties may be imposed; - the concept of clean hands and good facts can influence the judiciary when arguing that a taxpayer’s right to just administrative action has been violated; and - discriminatory and unfair legislation and conduct on the part of SARS may and should be attacked on a substantive law basis, especially where human dignity is at stake. The overall conclusion is that taxpayers’ rights are more far-reaching than prior to 1994 but still have some way to go before they are fully interpreted and developed. / Accounting Science / D.Compt.

Prior to 1994, South African taxpayers had little protection from fiscal legislation or the decisions, actions or conduct of the South African Revenue Service (“SARS”) that violated their common law rights. Parliament reigned supreme and in tax matters, the strict and literal approach to the interpretation of statutes was employed, with the judiciary often quoting the mantra that there is “no equity about tax”. The Income Tax Act (Act No 58 of 1962) was littered with discriminatory and unfair provisions based on age, religion, sex and marital status. Even unreasonable decisions taken by SARS could not be reviewed by the judiciary as “unreasonableness” was not a ground for review of the exercise of a discretion by SARS. On 27 April 1994, the constitutional order changed. Parliamentary supremacy was replaced with constitutional supremacy and the rights to privacy, equality, human dignity, property and just administrative action were codified in a Bill of Rights. The codification of these fundamental rights has materially changed the nature and extent of the rights of South African taxpayers. The objective of this thesis, therefore, is to identify, analyse and discuss South African taxpayers’ rights from a constitutional perspective. The following major conclusions can be drawn from the research done: - the judiciary have been forced to reappraise their approach to the interpretation of statutes from a “strict and literal” to a “purposive” approach that is in accordance with the values underpinning the new constitutional order; - new legislation has amended some of the so-called “reverse” onus of proof provisions that were constitutionally unsound – this should result in greater fairness and consistency for affected taxpayers especially in the area of when penalties may be imposed; - the concept of clean hands and good facts can influence the judiciary when arguing that a taxpayer’s right to just administrative action has been violated; and - discriminatory and unfair legislation and conduct on the part of SARS may and should be attacked on a substantive law basis, especially where human dignity is at stake. The overall conclusion is that taxpayers’ rights are more far-reaching than prior to 1994 but still have some way to go before they are fully interpreted and developed. / Accounting Science / D.Compt.

Abstracts in English, Afrikaans and Northern Sotho / The tax compliance costs of individual taxpayers in South Africa are unknown, and it is essential to determine, amongst other things, whether these costs pose a risk of causing non-compliance, which could have a negative effect on the collection of tax revenue. Hence, the aim of the study was to assess the tax compliance costs of individual taxpayers in South Africa. The assessment of tax compliance costs entailed calculating these costs in relation to the submission of income tax returns and post-filing activities, ascertaining the determinants of these costs and suggesting ways to reduce them. Using data collected from an online survey conducted among 10 260 taxpayers, it was estimated (applying various methods) that income tax compliance costs of individual taxpayers for the 2018 year of assessment were between 3.61% and 5.31% of the personal income tax revenue. These results compared well with ratios reported in most studies conducted in other countries and showed a reduction from the results obtained from 752 taxpayers for the 2017 year of assessment. Chi-square automatic interaction detection (CHAID), a decision tree modelling technique, was used to ascertain the determinants of tax compliance costs and to identify specific groups of taxpayers associated with distinct ranges of the determinants that were statistically significant predictors of tax compliance costs. This breakdown enabled a better understanding of the influence that the specific values of the continuous determinants, such as the service quality rating of the South African Revenue Service (SARS), and the categorical determinants, such as education level and employment status, have on tax compliance costs. The CHAID analysis therefore provided an additional level of insight not possible with regression analysis, enhancing the usability of the results. Employment status and income tax bracket had the strongest association with tax compliance costs (on average, self-employed taxpayers and taxpayers in the highest income tax bracket had the highest total tax compliance costs). Various other determinants, for example, type of assistance obtained, gender, education level, complexity of tax legislation, complexity of SARS guides, and SARS’s service quality rating were also identified in the analyses. / Die belastingvoldoeningskoste van individuele belastingpligtiges in Suid-Afrika is onbekend, en dit is noodsaaklik om, onder andere, te bepaal of hierdie koste ʼn risiko van nievoldoening inhou wat ʼn negatiewe uitwerking op die insameling van belastinginkomste kan hê. Die doelwit van die studie was dus om die belastingvoldoeningskoste van individuele belastingpligtiges in Suid-Afrika te assesseer. Die assessering van belastingvoldoeningskoste behels die berekening van hierdie koste ten opsigte van die indiening van inkomstebelastingopgawes en ná-indieningsaktiwiteite, bepaling van die determinante van hierdie koste en voorstelle van hoe om dit te verminder. Aan die hand van data wat ingesamel is deur ʼn aanlyn opname onder 10 260 belastingpligtiges, is (deur middel van verskeie metodes) geraam dat inkomstebelasting-voldoeningskoste van individuele belastingpligtiges vir die 2018-assesseringsjaar tussen 3.61% en 5.31% van die persoonlike-inkomstebelastinginkomste was. Hierdie resultate het goed vergelyk met verhoudings soos berig in die meeste studies wat in ander lande uitgevoer is en het ʼn afname gewys in die resultate wat by 752 belastingpligtiges vir die 2017-assesseringsjaar bekom is. Chi-kwadraat outomatiese wisselwerkingbespeuring (chi-square automatic interaction detection – CHAID), ʼn besluitnemingskema-modelleringtegniek, is gebruik om die determinante van belastingvoldoeningskoste te bepaal en om spesifieke groepe belastingpligtiges te identifiseer wat statisties-beduidende voorspellers van belastingvoldoeningskoste is. Hierdie uiteensetting het ʼn beter begrip daargestel van die invloed wat die spesifieke waardes op die deurlopende determinante, soos die diensgehaltegradering van die Suid-Afrikaanse Inkomstediens (SARS), en die kategoriedeterminante, soos onderwysvlak en indiensnemingstatus, op belastingvoldoeningskoste het. Die CHAID-ontleding het dus ʼn bykomende vlak van insig voorsien wat nie moontlik is met regressieontleding nie en sodoende die bruikbaarheid van die resultate verbeter. Indiensnemingstatus en inkomstebelastingkategorie het die sterkste assosiasie met belastingvoldoeningskoste (belastingpligtiges in eie diens en belastingpligtiges in die hoogste inkomstekategorie het gemiddeld die hoogste totale belastingvoldoeningskoste). Verskeie ander determinante, byvoorbeeld, soort bystand verkry, geslag, onderwysvlak, kompleksiteit van belastingwetgewing, kompleksiteit van SARS-gidse en SARS-diensgehaltegradering is ook in die ontledings geïdentifiseer. Die studie het afgesluit met voorstelle om individuele belastingspligtiges se belastingvoldoeningskoste te verlaag. / Ditshenyegelo tša ditefelo tša go obamela melawana ya metšhelo ka balefamotšhelo ka Afrika Borwa ga di tsebje, gomme go bohlokwa gore re tsebe, gareng ga tše dingwe, ge eba ditshenyegelo tše di tliša kotsi ya go baka gore balefamotšhelo ba se ke ba obamela melawana ya metšhelo, e lego seo se ka bago le seabe sa go se loke go kgoboketšo ya letseno la motšhelo. Ke ka lebaka leo, maikemišetšo a dinyakišišo tše e bile go sekaseka ditshenyegelo tša go obamela melawana ya motšhelo ka balefamotšhelo ka Afrika Borwa. Tshekatsheko ya ditshenyegelo tša go obamela melawana ya motšhelo go ra gore re swanetše go hlakanya ditshenyegelo tše mabapi le go romela dingwalwa tša motšhelo le ditiragalo tša ka morago ga go romela dingwalwa tšeo tša motšhelo, go realo e le go tseba dilo tšeo di bakago ditshenyegelo tše le go šišinya mekgwa ya go di fokotša. Ka go šomiša tshedimošo ye e kgobokeditšwego go dinyakišišo tšeo di dirilwego ka inthanete gareng ga balefamotšhelo ba 10 260, go akantšwe gore (ka go diriša mekgwa ye e fapafapanego) ditshenyegelo tša go obamela melawana ya motšhelo wa letseno ka balefamotšhelo ka ngwaga wa tshekatsheko ya metšhelo wa 2018 di bile magareng ga 3.61% le 5.31% ya tšhelete ya motšhelo wa letseno. Dipoelo tše di bapetšwa gabotse le dikelo tšeo di begilwego ka dinyakišišong tše ntši tšeo di dirilwego ka dinageng tše dingwe gomme di laeditše go fokotšega go tšwa go dipoelo tšeo di hweditšwego go balefamotšhelo ba 752 ka ngwageng wa tshekatsheko ya metšhelo wa 2017. Kutollo ya tirišano ya maitirišo ya Chi-square (CHAID), e lego mokgwa wa go nyakišiša sephetho ka maphakga, e šomišitšwe ka nepo ya go tseba dilo tšeo di bakago ditshenyegelo tša go obamela melawana ya motšhelo le go hlaola dihlopha tše itšego tša balefamotšhelo bao ba amanago le mehuta ye e swanago e nnoši ya dihlaodi tšeo di bilego bohlokwa go ya ka dipalopalo mabapi le ditshenyegelo tša go obamela melawana ya motšhelo. Karoganyo ye e kgontšhitše kwešišo ye kaone ya khuetšo yeo dikokwane tše itšego tša dilo tšeo di tšwelago pele go baka se, tša go swana le kelo ya boleng bja tirelo ye e abjago ke Tirelo ya Motšhelo ya Afrika Borwa (SARS), le dilo tšeo di bakago go se obamele melawana ya motšhelo go ya ka makala, go swana le maemo a thuto le maemo a mošomo, go ditshenyegelo tša go obamela melawana ya motšhelo. Tshekatsheko ya CHAID ka fao e file maemo a tlaleletšo a tsebo yeo e sa kgonagalego ka tshekatsheko ya poelomorago, go maatlafatša go šomišega ga dipoelo. Maemo a mošomo le legoro la motšhelo wa letseno di bile le kamano ye kgolo le ditshenyegelo tša go obamela melawana ya motšhelo (ka kakaretšo, balefamotšhelo bao ba itšhomelago le balefamotšhelo bao ba lego ka go legoro la godimo la motšhelo wa letseno ba na le palomoka ya godimodimo ya motšhelo wo ba lefišwago ona). Dilo tše dingwe tša mehutahuta tšeo di bakago go se obamele melawana ya motšhelo, go fa mohlala, mohuta wa thušo ye e hweditšwego, bong, maemo a thuto, go se kwešišege ga melawana ya motšhelo, go se kwešišege ga ditlhahli tša SARS, le kelo ya boleng bja tirelo ya SARS le tšona di utollotšwe ka tshekatshekong. Dinyakišišo di feditše ka go fa ditšhišinyo mabapi le ka fao go ka fokotšwago ditshenyegelo tša go obamela melawana ya motšhelo ka balefamotšhelo. / D. Phil. (Accounting Sciences)