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Abstract
Is a taxpayer's act of tax avoidance deemed compliant or non-compliant? Academic researchers, investigating tax compliance behaviour, address the term tax avoidance differently for a variety of purposes. In order to gain insight into compliance behaviour, it is important to get a clear understanding of the meaning of tax compliance. In addition, how to classify and perceive the various behavioural responses to taxation is of crucial importance not only for academic researchers and policy makers, but for ordinary taxpayers whose tax behaviour is embedded in social structure and influenced by social representations. In this paper, I discuss relevant issues regarding the conventional conceptualisations of tax avoidance, and present a distinguished concept of tax avoidance which represents two different statuses with insights from psychological approaches to tax behaviour in general and motivational posture in particular. I argue that the term tax avoidance itself should be regarded as neutral. Defiant avoidance refers to potentially unacceptable avoidance, which has the capacity to be challenged by the tax inspector and disallowed by the tax courts. On the contrary, deferential avoidance is in compliance not only with the provision of the law, but also with the spirit and purpose of law and fiscal policy. The bottom line is that the concept of tax non-compliance should necessarily include defiant avoidance, but exclude deferential avoidance as being legally, morally and socially approved.
Keywords: tax compliance, tax avoidance, motivational posture, deferential avoidance, defiant avoidance
1. Introduction
In modern societies, taxes are the most important source of financing the public goods, and taxation is usually the most powerful economic tool to encourage socially desired activities and/or reduce inequality of income distribution. However, tax avoidance as well as tax evasion is known to be a universal and pervasive phenomenon in all societies. Tax non-compliance entails not only a reduction in public services owing to the loss of tax revenues, but distortion of income distribution as taxpayers have different opportunities for paying less tax.
Facing different opportunities for evasion and/or avoidance, taxpayers may end up with disrespect for the authority and feelings of unfairness, which, in turn, dampen their willingness to pay taxes. Thus, it is of great interest for the government to implement a fiscal policy that strengthens tax compliance. In order to...