Possible causes of tax evasion and avoidance, with particular reference to Australia

• Main Author: Wallschutzky, Ian Gregory
• Published: University of Bath 1983
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.767525

The purpose of this thesis was to enquire into the possible causes of tax evasion and avoidance and to suggest reforms which might be considered by the legislature to limit those practices. It was shown that it is possible to resolve the possible causes of evasion and avoidance into two components: namely, the opportunity that exists in a tax system for those practices and the motivating influences which cause taxpayers to undertake them. By way of example the Australian income tax system and Australian taxpayers were studied. A brief summary of results follows. Analysis of the Australian tax system revealed that inadequate bookkeeping requirements, inadequate resources used to detect evasion, anomalies in the penalty structure and failure to deduct tax at source for all types of income contributed to the level of evasion. Greatest scope for avoidance arose because of the failure of the Australian tax system to prevent income splitting, failure to tax all capital gains and failure to quickly remedy legislative defects. Further, the large number of exemptions to the tax base and the failure of the general anti-avoidance provision (s.260) also contributed to the level of avoidance. Testing of various hypotheses about taxpayer behaviour suggested that the most important hypothesis was the exchange relationship hypothesis and that the main element of this was taxpayers' perception that tax rates were too high. Some support was also found for the social orientation hypothesis and the administrative control hypothesis. Though it was not the primary purpose of this thesis to outline reforms, some reforms were suggested. These covered reforms to remedy systemic weaknesses, for example introduction of a flat rate of tax and a capital gains tax, and reforms to affect taxpayer behaviour: for example, greater use of the media to improve taxpayers' knowledge of Government spending. Government need for taxpayers' money and Tax Office enforcement activities.