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1980 B.T.R. 28 (1980)
Taxpayers' Attitudes to Income Tax Evasion: An Empirical Study

handle is hein.journals/britaxrv1980 and id is 62 raw text is: 







   TAXPAYERS' ATTITUDES TO INCOME TAX
         EVASION: AN EMPIRICAL STUDY

         PETER   DEAN,  TONY  KEENAN  AND  FIONA KENNEY

                           INTRODUCTION
 RAISING revenue is an important function of all governments. Indeed
 Cicero called taxes  the sinews of the state. In the United Kingdom
 the income  tax is the single most important source of government
 revenue. People's attitudes towards the income  tax are therefore
 of crucial importance, affecting not only the Government's ability
 to raise revenue, but  also other fiscal aims  such as  economic
 stabilisation and income redistribution. This paper is about income
 tax compliance, i.e. people's willingness to pay income tax. It is
 also about the  obverse, tax resistance. Tax resistance takes two
 major forms:  avoidance and  evasion, both of which  diminish the
 Government's  tax receipts. Tax avoidance is countenanced by  the
 law; evasion involves breaking it.
   Economists have  postulated a relationship between tax rates and
 tax resistance: the higher the level of taxation the  greater the
 incentive to escape tax burdens. The relationship could apply over
 time. Thus  as the general level of taxation increased, taxpayers
 might resort to evasion and avoidance to protect post-tax income.
 It could also apply to a cross-section of taxpayers at a point in
 time. Those paying tax at high marginal rates would receive higher
 rewards for evasion and  avoidance and  thus might  exhibit more
 tax resistance than those paying tax at lower marginal rates. On
 the other hand diminishing marginal utility of money might disturb
 this relationship. In other words, although for high marginal rate
 taxpayers the rewards for tax resistance are higher, these taxpayers
 may  attach a  lower economic  significance to the rewards  than
 taxpayers on lower incomes whose  needs for extra income may  be
 more keenly  felt.
 Clearly  tax evasion pays, but it is only achieved at a certain cost.
 Economists  Allingham  and  Sandmo   1 take  the  cost to  be  a
 combination of the likelihood of detection and the probable penalties
 if detected. Their model assumes the  taxpayer to be a  perfectly
 amoral, risk-averse and utility-maximising individual. He weighs the
 tax saved through evasion against the risks of detection and punish-
 ment. Provided the savings are large enough in relation to cost, he
 1 M.  G. Allingham and A. Sandmo,  Income Tax Evasion: a Theoretical
Analysis  [1972] I Journal of Public Economics 323-338.
                               28

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