Tax Psychology (2)
Social representations and
communication
Erich Kirchler
University of Vienna, Austria
TARC Master Class
London - 2014
Economic understanding of adults
Lay theories of economic relations (in contrast to
expert knowledge of, for example, economists):
• Are developed on the basis of daily experiences
• Schematically simplified; stereotypes
• Provide explanations and orientations for
behaviour
2
1. Knowledge about taxes
3
Complexity of tax law
Tax law is not always clear…
Slemrod et al. (2001, p. 459): “… although one can assert that legality is
the dividing line between evasion and avoidance, in practice the line is
blurry; sometimes the law itself is unclear, sometimes it is clear but not
known to the taxpayer, sometimes the law is clear but the administration
effectively ignores a particular transaction or activity.”
4
Tax law is not always clear…
Owens & Hamilton (2004) collected experiences and innovations in
taxation in various countries. They state that in OECD countries, one of
the major problems in tax administration is what tax administration has to
administer, the tax laws and how to interpret them (complexity, ambiguity,
incomprehensibility of the law).
Tax laws have become so intricate that even experts, such as
accountants, attorneys, and tax officers have difficulty interpreting many of
the law’s provisions.
Owens & Hamilton (2004) report that the number of words in the IRS Code
(Income tax law, and entire tax code) increased steadily from 1955 to
2000.
5
Growth in number of words in the IRS Code from 1955 to 2000; adopted from www.
taxfoundation/org/compliancetestimony.html; quoted in Owens and Hamilton (2004)
Thousands of words
1800
1600
1400
1200
1000
Income taxes only
Entire tax code
800
600
400
200
0
1955
1965
1975
1985
6
1995
2000
Tax law is not always clear…
Moser (1994) undertook a linguistic analysis of tax laws and claims
several bad habits which make it difficult for ordinary taxpayers to
understand the law.
Lewis (1982) reports that the necessary education to understand the law is
between 12 and 17 years in USA, UK, and Australia, respectively.
Readability is the ease with
which text can be read and
understood. Various factors to
measure readability have been
used, such as "speed of
perception," "perceptibility at a
distance," "perceptibility in
peripheral vision," "visibility,"
"the reflex blink technique," "rate
of work" (e.g., speed of reading),
“eye movements” and fatigue in
reading.“
The Flesch formulas: FleschKincaid readability test
7
Tax laws are not always clear…
Efforts to simplify the law are undertaken in almost all countries.
“I hold in my hand 1,379 pages of
tax simplification.”
U.S. congressman Delbert L. Latta
8
Subjective knowledge
Tax law is complex.
Sakurai & Braithwaite (2003) found in an survey with more than 2,000
Australian taxpayers that a relatively small percentage of respondents
described themselves as fully competent:
36% denied fully the question, “I feel competent to do my own income tax
return.”,
26% indicated to feel a little competent,
25% a fair bit,
12% very much.
It is not surprising that more than three thirds rely on tax agents, 6.5% on
tax office staff, and 20% on other people.
According to Blumenthal & Christian (2004) close to 60% of the 128 million
individual income tax returns in the USA filed for tax in 2001 were signed
by a preparer.
9
Poor understanding of tax law, taxation and tax rates
breed distrust.
Low tax knowledge is correlated with low compliance.
Using education as a proxy for tax knowledge, it was found that higher education
correlates with compliance (Kinsey & Grasmick, 1993; Song & Yarbrough, 1978; Spicer
& Lundstedt, 1976; Vogel, 1974). Schmölders (1960) reports in his influential study on
tax morale in Germany that agreement with governmental activities and fiscal policy
was higher in higher educated groups.
Several survey studies found a positive relationship between (subjective or objective)
tax knowledge and attitudes towards taxes and fairness assessments (Cuccia &
Carnes, 2001; Kirchler & Maciejovsky, 2001; Niemirowski et al., 2002; Park & Hyun,
2003)
Kirchler, Maciejovsky & Schneider (2003) assessed tax knowledge of fiscal officers,
students of economics and business administration, business lawyers, and
entrepreneurs, using a multiple choice test consisting of ten items, and correlated their
knowledge with fairness judgments of tax avoidance, tax evasion and tax flight. Tax
knowledge was neither correlated with the perceived fairness of tax evasion nor with the
perceived fairness of tax avoidance. However, for business lawyers and entrepreneurs it
was found that profound tax knowledge is positively correlated with perceived fairness
of tax avoidance, indicating that the better the knowledge the fairer was tax avoidance
10
perceived.
2. Representations of taxes
11
Representations of taxes
Fynantzer
= Landbetrieger,
derscrews
die Leute
Tax inspector
= Impostor who
umbs
bescheisset
peopleGeld
for their
money
Basilius Faber, 1680
Thesaurus editionis scholasticae
12
Representations of taxes
Peter Sloterdijk (2010)
“The modern democratic state gradually
transformed into the debtor state...
This metamorphosis has resulted,… , from
a prodigious enlargement of the tax base –
most notably, with the introduction of the
progressive income tax…
… each year, modern states claim half of
the economic proceeds of their productive
classes and pass them on to tax collectors,
and yet these productive classes do not
attempt to remedy their situation with the
most obvious reaction: an antitax civil rebellion.”
Attitudes and tax morale
Schmölders (1960):
Tax morale is the “attitude of a group or the whole population
of taxpayers regarding the question of accomplishment or
neglect of their tax duties; it is anchored in citizens’ tax
mentality and in their consciousness to be citizens, which is
the base of their inner acceptance of tax duties and
acknowledgment of the sovereignty of the state.” (p. 97f).
Bruno Frey & Benno Torgler
Tax morale = intrinsic motivation to comply
Tax morale and
size of shadow
economy
(Alm & Torgler,
2005)
30
Size of Shadow Economy (in % of the GDP)
Attitudes drive
behavior
(Schmölders:
tax morale)
□ Italy
20
□ Belgium
Norway
□ Spain
□
Portugal □
□
Sweden
Finland□
Germany
Netherlands □
□
Ireland □ □ Denmark
France□ □Great Britain
Austria
□□
□USA
Switzerland
10
0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Degree of Tax Morale
16
Lay theories
Lay theories are often explained on the basis of the
Theory of Social Representations (Moscovici, 1981)
17
Social representations
[...] a system of values, ideas and practices with a
twofold function; first, to establish an order [...]
and secondly to enable communication to take
place among the members of a community [...]
(Moscovici, 1961/1973)
• „Common-sense-theories” on fundamental
issues that are of concern to the community
(Moscovici & Hewstone, 1983); everyday knowledge
• Combine psychological and sociological
elements (social groups, strata)
18
Definition: Wagner (1994)
Social representations are …:
Metaphoric images, representations, conceptions of socially
relevant phenomena; often pictographically-symbolically,
linguistically expressed; unite cognitive, affective, evaluative
and conative aspects
Perspective of individual knowledge-systems
Formation processes, change-dynamics and elaborations in
social interactions, in everyday discourse, in social/societal
discourse
Perspective of collective discourse
A concept, which makes it possible to refer social and
individual analysis-systems to each other and to explain how
social processes lead to individual, socially grounded
representations
Perspective of „macro-reduction of individual
knowledge systems to social processes”
19
Social representations comprise:
• Core: determines the meaning and identity of a social
representation and consists of explicit or implicit
fundamentals of the representations
and
• Periphery: protects the core, to adjust the social
representation to context and time.
Social representations develop through:
• Anchoring: The unfamiliar is classified and ascribed with a
meaning.
• Objectification: The abstract concepts are turned into
something concrete and assume real respectively physical
representations (e.g. the word „bravery” is envisaged as a
hero)
21
Sociogenesis of social representations
(Wagner et al., 1999)
Society,
social groups
Threatening or unfamiliar phenomenon
or event (e.g. implementation of the
Euro, publication of the theory of
psychoanalysis)
Collective examination, search
for related contents, copies
etc.
Social
identity
The novel representations
adds to the social identity
of the society or social
group
The “world” of the
society or social
group is enriched by
a novel
representation
Anchoring to and
interpretation on the
basis of familiar contents
and representations.
The social discourse leads to
objectification, i.e. to representations
in the form of pictures, metaphors,
symbols, etc.
Novel social
representation
The unfamiliar phenomenon
becomes familiar and part of
common sense
22
Attitudes
Allport (1935, p. 810): “A mental and neural state of
readiness, organised through experience, exerting a
directive or dynamic influence upon the individual’s
response to all objects and situations with which it is
related.”
Stroebe (1980): Attitudes towards an attitude object
consist of
The opinions on the object (cognitive aspect)
The sympathy (affective aspect) and
The behavioral intentions (conative aspect).
23
Attitudes
Thomas (1991)
Measurable independent
variable
Intervening
variable
Affect
Attitude object
(people, social
groups, situations,
actions etc.)
Attitude
Cognition
Behavior
Measurable dependent
variable
Reactions of the
autonomic
nervous system;
verbal comments
on emotions
Perceptual judgments;
verbally uttered
opinions
Manifest behavior;
information on own
behavior
24
Attitudes and behavior
Attitudes cannot be observed directly, but
represent a relevant basis of behavior.
25
Measuring attitudes
• Psychobiological level:
– E.g. pulse rate, electrodermal responses, ECG, EEG,
fMRI (neuro-economics)
– Registration of eye movements (search of information
sequence of information search):
„Spotlight – Viewer”: Selective attention of the
consumers while watching advertisements
Advantage: Little technical, financial, organizational,
and temporal effort in comparison to classical eyetracking
26
Information search: the spotlight-viewer
(…rather than eye tracking) (Berger, 2009)
E.g., experiments on information search (audit probability, fines, social norms…)
Measuring attitudes
• Behavioral observation
– E. g., “lost letters”
• Surveys and interviews
– Qualitative methods (e.g. in-depth interviews)
– Quantitative methods (e.g. direct surveys)
– Combined methods (e.g. associations)
28
Qualitative methods
• In-depth interview: Collection of associations
with the “object”: inquire all “object” attributes
that are deemed important and then analyze the
cognitive structure that lies behind them by
repeatedly asking “why-questions”
• Focus groups: The interaction provides an
insight into complex behavioral patterns and
personal motives: host, video or audio
recordings
• Qualitative-quantitative method: Associative
network (see below)
29
Quantitative methods
„Direct” attitude measurement
How do you rate taxes [VAT, income tax, etc.]?
Very bad
Bad
Neither
Good
Very good
Remember: Not the attitude per se is measured “directly”,
but the verbally uttered opinions are inquired directly.
30
Likert’s method of added ratings
Attitudes as disapproval or approval of an attitude
object
Development of the scale:
•
•
•
•
Collection of favorable and unfavorable statements
Multi-point rating of agreement – disagreement
Item analyses & selection, administration of the scale
The added score of the answers represents the attitude
index
31
Likert method – an example
Strongly
disagree
Strongly
agree
Paying taxes on time is a
citizen’s duty
5
4
3
2
1
Cheating on taxes is a minor
crime
1
2
3
4
5
32
Multi-attribute-models
Fishbein (1963), Fishbein & Ajzen (1975):
• Only few object features/traits are
perceived
• Attitude as a function of the subjective
probability and evaluation of these traits
n
Evaluation of
trait k
Aij = 1/n * ∑ (Pijk * Eijk)
k=1
Probability that k is
present
33
Multi-attribute-models - example
Trait of X
honest
How likely is this trait?
Unlikely
1
How do You evaluate
this trait?
Likely
Bad
Good
7
1
7
responsible
Attitude = 1 / 2 * ( (3 * 5) + (5 * 1) ) = 10
2 mentioned
traits
„safe”
„expensive”
34
Attitudes towards taking undue benefits and not declaring income (bar charts indicate percentages of
judgments of morally wrong behaviour, lines indicate percentages of people who might show the behaviour;
adopted from Orviska and Hudson (2002, p. 91)
60%
Taking undue benefits
Not declaring income
Total sample
50%
Sample below 40 years
40%
30%
20%
10%
0%
Not wrong
A bit wrong
Very likely Fairly likely
Wrong
Seriously wrong
Not wrong
A bit wrong
Wrong
Seriously wrong
Not very
likely
Not at all likely
Very likely
Fairly likely
Not very
likely
Not at all likely
35
Morally wrong
(bar charts)
Would do
(lines)
Representations of taxes
Although most citizens appreciate public goods and agree
with policy regulations, people neither like to pay taxes to
fund public goods nor to pay so called corrective taxes.
People like public goods but claim taxes are too high!
Task
TAX-I
37
38
Semantic differential („classic”
method; Osgood, 1970)
Active
Good
Ugly
Fast
Weak
Big
Powerful
Friendly
…
1
1
1
1
1
1
1
1
1
A
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
B
4
4
4
4
4
4
4
4
4
5
5
5
5
5
5
5
5
5
6
6
6
6
6
6
6
6
6
7
7
7
7
7
7
7
7
7
Potency
Passive
Activity
Bad
Beautiful Valence
Slow
Strong
Small
Powerless
Unfriendly
…
39
Semantic differential (description vs
evaluation; Peabody, 1985)
Basic idea: separation of the evaluative and descriptive components
Example: Description of the manner/demeanor of a company on the
market via pairs of traits such as prudent/imprudent, timid/bold
Use of prudent or bold
→ Evaluation of the company is positive
Use of timid and imprudent
→ Evaluation of the company is negative
Use of prudent or timid
→ Description of the company as risk-averse
Use of bold or imprudent
→ Description of the company as willing to take risks
40
Semantic differential (description vs
evaluation; Peabody, 1985)
X
Y
thrifty
stingy
+3
-3
+2
-2
+1
-1
0
0
-1
+1
-2
+2
-3
+3
extravagant
generous
thrifty
stingy
+3
-3
+2
-2
+1
-1
0
0
-1
+1
-2
+2
-3
+3
extravagant
generous
Evaluative aspect = (scale a + scale b) /2
Descriptive aspect = |scale a – scale b| /2 or reverse one scale
X
evaluative aspect = (1 + 3) /2 =
descriptive aspect = (-1 + 3)/2 =
2
1
Y
evaluative aspect = (-1 + -1) /2 =
descriptive aspect = (1 + -1)/2 =
-1
0
41
Associative network (de Rosa, 1993)
Too high 1 -
Theft 4 -
Burden 2 +
Necessary 3 0
Unjust 5 +
Evil 6 +
Analyses:
• Content of the associations
• Evaluation (+/0/-): “polarity index”, “neutrality index”
• Sequences: in combination with the frequency of “core” and “peripheral”
• Links
42
Task
-
0
0
0
0
0
0
0
0
0
0
0
0
+
+
+
+
+
+
+
+
+
+
+
+
Judgments of “typical taxpayers”, “honest taxpayers”, and
“tax evaders” (Semantic Differential - Peabody)
Descriptive dimensions
Lazy versus hard-working
Typical taxpayer
Honest taxpayer
Tax evader
Stupid versus intelligent
Typical taxpayer
Honest
taxpayer
Tax evader
Evaluative components
Negative versus positive evaluation
Typical taxpayer
Honest taxpayer
Tax
evader
Taxevader
44
Associations to taxes of entrepreneurs, civil servants, students, white, and blue
collar workers (explained variance: Dimension 1 = 38%; Dimension 2 = 30%;
Dimension 3= 17%; Kirchler, 1998)
Technical tax terms
Economic
regulator
STUDENTS
ENTREPRE
Financial loss Lack of clarity
.89
Dimension 2
Public constraint
NEUERS
Not categorized
Public goods
Names
of
Bureaucracy
Public deficit
politicians
BLUE COLLAR WORKERS
and political institutions
Criticism of the government
Punishment and disincentive
0
Tax evasion
Necessary evil
Social security
Salary and income
WHITE COLLAR WORKERS
Instrument for politicians
-.77
CIVIL SERVANTS
Criticism of politicians
Social welfare
Social justice
-1.36
1.50
.86
0
Dimension 1 0
-.80
-.69
Dimension 3
45
Attitudes and behavior
• Hidden measurment:
• Haire (1950): Customers complained about the
taste and smell of the novel product instant
coffee. Judgments were seen as
“rationalizations”, a negative attitude was
suspected.
Indirect method: Construction of two shopping
lists of a hypothetic housewife, description of this
housewife
46
Indirect attitude measurement (Haire, 1950)
½ kg bread
1 kg sugar
1 pack coffee beans
2 kg apples
1 salami
1 head of lettuce
½ kg bread
1 kg sugar
1 pack Nescafe
2 kg apples
1 salami
1 head of lettuce
Described as „lazy”, „ill planning”, „wasteful”, „with little sense of family”
47
Indirect attitude measurement
Imagine an
entrepreneur who is
married, with two
children, runs a firm…
evades taxes.
Imagine an
entrepreneur who is
married, with two
children, runs a firm…
avoids taxes.
Imagine an
entrepreneur who is
married, with two
children, runs a firm…
pays on time correct
taxes.
Describe the entrepreneur, the personality, etc.
48