Tax Talk: An Exploration of Online Discussions Among Taxpayers

Tax Talk: An Exploration of Online Discussions Among Taxpayers J Bus Ethics (2018) 149:931–944 https://doi.org/10.1007/s10551-016-3032-y Tax Talk: An Exploration of Online Discussions Among Taxpayers 1 1 Diana Onu Lynne Oats Received: 29 January 2015 / Accepted: 18 January 2016 / Published online: 19 February 2016 The Author(s) 2016. This article is published with open access at Springerlink.com Abstract We present an analysis of over 400 comments Introduction about complying with tax obligations extracted from online discussion forums for freelancers. While the topics inves- Whether you can observe a thing or not depends on tigated by much of the literature on taxpayer behaviour are the theory which you use. It is the theory which theory driven, we aimed to explore the universe of online decides what can be observed. (Albert Einstein). discussions about tax in order to extract those topics that While Einstein’s observation referred to quantum are most relevant to taxpayers. The forum discussions were mechanics, it is none less true for any field of knowledge subjected to a qualitative thematic analysis, and we present where systematic empirical testing of theory is central, a model of the ‘universe’ of tax as reflected in taxpayer including economics and social sciences. Theoretical discussions. The model comprises several main actors (tax frameworks focus researchers on specific variables, and in laws, tax authority, tax practitioners, and the taxpayer’s turn these researchers collect and analyse those data that are social network) and describes the multiple ways in which relevant to understanding their variables of interest. While they relate to taxpayers’ behaviour. We also conduct a such systematic testing of theory is essential, it also means more focused analysis to show that the majority of tax- that certain data are never observed because they are not the payers seem unconcerned with many of the variables that focus of current theories. In this paper, we explore one par- have been the focus of tax behaviour research (e.g. audits, ticular field of study and attempt to reveal such data that have penalties, etc.), and that most people are motivated to be escaped systematic observation due to the focus of current compliant and are more concerned with how to comply theories in the field: the study of taxpayer behaviour. than whether to comply. Moreover, we discuss how these When the Australian billionaire and media tycoon Kerry ‘real-world’ tax discussions question common assumptions Packer was asked about his tax affairs during a public in the study of tax behaviour and how they inform our inquiry, he said, ‘‘Now, of course, I am minimizing my tax, understanding of business ethics more generally. and if anybody in this country doesn’t minimize their tax they want their heads read’’. While Kerry Packer’s position Keywords Tax behaviour  Tax compliance  Tax may seem controversial to some, it will seem natural to evasion  Online discussion  Thematic analysis others; in the research environment, ‘head-reading’ efforts have attempted to establish the factors that explain this variation in how people make tax compliance decisions (for recent literature reviews, see Hashimzade et al. 2013; Kirchler 2007; Pickhardt and Prinz 2013). Tax behaviour research has seen contributions from & Diana Onu various disciplines, approaches, and theoretical positions. d.onu@exeter.ac.uk However, the field has been dominated by theoretical and Tax Administration Research Centre, Business School, laboratory-based research, research that is primarily driven University of Exeter, Streatham Court, Rennes Drive, by researchers’ assumptions (see Boll 2013; Oats 2012). Exeter EX4 4ST, UK 123 932 D. Onu, L. Oats The mainstream approach has been to test theoretically tax evasion decisions has come to be known as the ‘classic derived models of behaviour empirically, usually by eliciting model’ of tax compliance (Allingham and Sandmo 1972; people’s responses to a task (e.g. filling in a questionnaire, Yitzhaki 1974). Many authors subsequently noted the failure taking part in an experiment, etc.). Our approach in this paper of the classic model to predict realistic evasion levels (see is very different: we collect and analyse naturally occurring Andreoni et al. 1998), and several attempts have been made data on tax behaviour (online discussions) in a qualitative to improve the model (for a review, see Hashimzade et al. manner. We look at how people’s discussions confirm what 2013), for instance by considering the role of social norms in we know about tax behaviour, and also if there are differ- deterring tax evasion (Myles and Naylor 1996). ences between how people talk about tax ‘in the real-world’ As with many branches of applied economics, the per- and current results and assumptions in the literature. ceived failure of the ‘classic model’ based on taxpayers as Some of our findings are in line with previous thinking rational actors was noted by behavioural economists (see about tax compliance behaviour; other findings indicate the Alm et al. 1995). Many behavioural studies instead framed need to revisit assumptions we make about phenomena we evasion decisions in the context of public goods games (i.e. study. But, most of all, our interrogation of naturally tax is seen as something that all benefit from; however, occurring discussions reveals some blind spots in research individuals may be tempted to evade paying their share and on tax behaviour. We will dedicate the largest part of this still get a share of everyone else’s contribution). Studies paper to discussing findings of the analysis and their rela- looked at how different variations of the public goods game tionship with existing literature. Beforehand, we make a alter people’s decision to evade contributing to the public brief incursion into research on tax compliance to serve good; such variations include, for example, participants those readers less familiar with this field. having agency over penalty levels (Alm et al. 1999), the role of different tax rates for income brackets (Bosco and Mittone 1997), and others. Very Brief Overview of Tax Compliance Research The first works to look at tax compliance as an individual Broad Assumptions in the Tax Compliance psychological decision were published by Gu ¨ nter Literature Schmolders from the 1950s onwards (see, for instance, Schmo ¨ lders 1959). Although an economist himself, As pointed out elsewhere (Oats 2012), the vast majority of Schmolders (1959) advocated the need to use psychology works looking at tax compliance are situated in a posi- to understand fiscal behaviour, and he was particularly tivistic research paradigm, that is, they employ systematic interested in how people make compliance decisions based data collection (e.g. survey, experiment) and/or mathe- on their values or belonging to certain social groups (pro- matical analyses to validate research hypotheses. While fession, ‘social class’, etc.). A number of later works this approach has clear benefits in providing rigorous answered his call, constructing models of tax compliance answers, its drawback is that hypotheses rely heavily on that would take into account the variety of psychological researchers’ assumptions of what is important for tax and social factors involved in compliance decisions (e.g. behaviour. To give one example, as outlined above, personal values, attitudes, social norms, peer effects, and Allingham and Sandmo (1972) posit that audits and other such factors) (see, for example, Lewis 1982; Weigel penalties are essential to understanding compliance deci- et al. 1987; for an overview, see Webley 1991). More sions. As such, researchers’ theoretical and empirical recently, psychologists studying tax behaviour have looked analyses will become geared towards refining our under- in depth at several psychological factors related to com- standing of the role of audits and penalties. They, however, pliance, such as social norms (e.g. Wenzel 2004), percep- tell us nothing about the validity of our initial assumptions tions of tax authorities (e.g. Kirchler et al. 2008), stance that audits and penalties are indeed important for the tax towards authorities and government (Braithwaite 2009), behaviour of most individuals. In a laboratory experiment, and even the ‘mental accounting’ involved in dealing with changing audit rates may produce an important effect on one’s tax affairs (Adams and Webley 2001). behaviour because we control the effect of all other factors, A different stream of tax compliance research was but in ‘the real-world’, outside the lab, audit rates may be developed in economics in the early 1970s on the foundation one of the least important things considered by taxpayers. of Gary Becker’s (1968) economics-of-crime model, a In the current study, we attempt to provide an exploration model that posits that criminal decisions can be viewed as of what is important for taxpayers ‘in the real-world’, and rational choices: criminals weigh up the level of penalty and compare the results of this exploration with current the probability of being caught, and make a rational decision assumptions in the tax compliance literature. Before we following a cost-benefit analysis. This approach applied to describe our approach and method, we discuss below some 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 933 specific assumptions that are common in tax compliance 4. Taxpayers are concerned with audit rates and penalty research. levels As several authors have noted (e.g. Andreoni 1. Regarding tax behaviour, people’s chief concern is et al. 1998; James and Alley 2002; Kirchler 2007), the deciding whether to comply or not Most research has field of tax compliance has been dominated by the economics-of-crime approach to tax evasion (Alling- been geared towards understanding the tax compliance decision: to evade or not to evade (for reviews, see, for ham and Sandmo 1972), that is, that taxpayers make evasion decisions following a cost-benefit analysis that example, Andreoni et al. 1998; Kirchler 2007; Pick- hardt and Prinz 2013). However, in reality, many takes into account the income loss if caught evading (penalty) and the probability of being caught (audited). taxpayers do not know and struggle to find out how to comply, rather than whether to comply, spending time In this paradigm, raising penalty levels and conducting on deciphering the complexity and abstractness of the more audits produces higher compliance levels; often tax code (Alm et al. 2010). Tax authorities estimate called the deterrence approach (Alm and Torgler that a large section of people are willing to comply but 2011), this paradigm stresses the importance of do not know how to do so, a much larger proportion people’s assessment of penalty and audit levels for than people who would contemplate breaking the law compliance decisions. 5. Alternatively, taxpayers base their decisions on social (‘‘SME Customer Segmentation’’, 2010). Certainly, it is essential to study the compliance decision, but other norms Many have noted the failure of the deterrence model to explain why some people would not evade processes may be just as important in taxpaying behaviour. In reality, the compliance decision may be taxes even if penalties and audits never existed (e.g. irrelevant for a large swathe of taxpayers. Wenzel 2004), as well as its failure to predict the high 2. Compliance is a binary variable In order to opera- compliance levels observed in reality (Andreoni et al. tionalise the tax compliance decision as simply as 1998). As such, to explain why compliance levels are possible, the vast majority of studies of tax compli- higher than expected, many researchers propose that ance assume two distinct options for the individual: to social norms account for why so many people comply evade or to be fully compliant. However, as some when the ‘rational’ choice would be to evade. Evasion have pointed out, ‘real-world’ compliance is far from is thought to be mitigated by strong norms against evasion (e.g. Bobek et al. 2007; Wenzel 2005), binary. The complexity of compliance is illustrated by the existence of different types of compliance (e.g. whether that is because people fear the negative consequences of reputation loss (Myles and Naylor voluntary versus enforced compliance, see Braith- waite 2009; Kirchler and Wahl 2010), or by situations 1996) or because strong norms signal that most other taxpayers are willing to contribute to the public goods of taxpayers taking advantage of legal ‘grey areas’ to drastically minimise tax while still complying with (Frey and Torgler 2007). the letter of the law (tax avoidance, Kirchler and Wahl 2010; creative compliance, McBarnet 2004). While tax evasion may be defined as evading taxes The Current Study with intent (McBarnet 2004), it maybeverydifficult to determine whether misreporting on a tax return is As outlined above, certain broad assumptions seem to due to evasion intent or error. In the attempt to underpin much of research on tax compliance. However, simplify compliance to a binary decision for research there is little exploration of the extent to which these purposes, it may be that such simplification bears assumptions are relevant for tax behaviour as a whole. As little resemblance to the complexity of realistic tax we briefly discussed, there is reason to doubt that some of compliance behaviour. these assumptions readily reflect the reality of paying tax 3. The taxpayers and the tax authority are the main for many individuals. To explore individuals’ reality in actors The majority of studies have looked at the depth, qualitative methods of inquiry may prove more relationships between taxpayers and the tax authority, effective (for an overview of qualitative methods in tax to the detriment of other ‘actors’ such as peer groups, research, see Oats 2012), particularly when the researcher accountants and legal advisors, etc. (for a review, see is merely observing tax compliance processes without Pickhardt and Prinz 2013). Although it may seem that intervening (as opposed to, for instance, surveying tax- the actions of tax authorities are most important for tax payers). Observation of naturally occurring behaviour has compliance (i.e. by employing certain audit strategies, been used extensively in the social sciences (for an having a customer-focused approach, etc.), research example of ethnographic observation of tax audits, see Boll has not focused in as much detail on the role of other 2013). In this study, we collect and analyse naturally ‘actors’. 123 934 D. Onu, L. Oats occurring interactions, but in an online environment (what 2011; Parker 2000). Third, we chose online discussion is sometimes termed ‘netnography’ in business and forums as opposed to other social media because discus- organisational studies, see Kozinets 2002; see also Garcia sions on these forums tend to be more elaborate than those et al. 2009; Hine 2000). We present an analysis of dis- usually posted on social networking sites, allowing more cussions about tax on online forums for self-employed depth to the analysis. individuals; this analysis is not focused by particular We chose to focus on the UK rather than include more hypotheses—it is an open exploration of the tax behaviour countries because narrowing the focus allowed a more ‘universe’ as reflected in people’s discussions about tax. comprehensive data collection strategy. Although we do We chose the virtual ethnographic approach given sev- not make any claims regarding how representative the eral advantages it presents. First, the approach allows us to comments collected are for all discussions about tax among collect data that have not been generated by a researcher UK self-employed professionals, we have endeavoured to and that reflect people’s naturally occurring concerns. select the most prominent forums for a range of occupa- Second, it provides some insight into taxpayers’ attitudes tions, and included all comments about tax on those for- and opinions. People often discuss online with a high ums. Most of the comments included in the analysis were degree of self-disclosure, including sensitive topics, par- collected on a general discussion forum for freelancers, but ticularly when they address those they feel connected to we also aimed to include specialised forums for particular (e.g. peers in the same profession), as opposed to disclosing professions (those included here are forums for artists, to a researcher in a one-off survey or interview. Third, designers, construction industry professionals, nurses, online communication is less hierarchical and may thus doctors, beauticians and hairdressers, and IT contractors). allow more freedom of expression than traditional research The selection of these groups, however, is not intended to settings that place the researcher in an expert position (for imply that behaviour in these groups is different from the overviews, see Hine 2013; Kozinets 2015). wider population. To make sure we include all potentially relevant dis- cussions, we selected from the relevant forums all the Method discussions that contained the term ‘tax’, and subsequently eliminated from the dataset only those where ‘tax’ was Data Collection used to refer to something other than taxation (e.g. people using ‘taxing’ to mean ‘demanding’). Data were collected The dataset analysed consists of over 400 user comments in late 2013–early 2014, but some of the comments were about tax on discussions forums for self-employed profes- posted as early as 2003, although most were much more sionals in the UK. The dataset comprises 144 conversations recent. All the information collected is publicly available, on these forums: a forum user asks a question or raises an and did not require the researcher to register as a forum issue related to tax which is followed by other users replying, user in order to access it. debating, advising, sharing their own experience, etc. These online forums are not specialised tax forums, but general Thematic Analysis forums for individuals who work as freelancers and/or run micro-businesses, where individuals will discuss a wide To analyse the conversations, we employed thematic range of issues (e.g. how to start and run a business, how to analysis (Braun and Clarke 2006). Considered the most advertise products, etc.), including legal issues and taxation. widely used qualitative analysis method, thematic analysis This particular data collection strategy was preferred for provides a systematic approach to extract meaning from several reasons. First, we focused on general forums rather text data (Braun and Clarke 2006). We used qualitative than those specialised on tax issues because we aimed to analysis software (NVivo), and began by open-coding all collect conversations relevant to people who have no the comments in the dataset (i.e. a process of assigning a expertise or keen interest in taxation. Second, we chose to label to each comment relevant to its content, for instance focus on self-employed individuals, as they represent a ‘tax authority’ or ‘fine’). This process allowed the creation relatively simple case for understanding tax compliance. of a set of categories that were further refined, that is, This contrasts with taxation in small or even medium-sized similar themes were merged, or large and heterogeneous businesses where decisions are more complex, often being themes were split into sub-themes. This iterative process of distributed among directors, involving a larger number of refining categories while ensuring they are true to the taxes, etc. Mitigating factors such as reputation loss and the underlying data ultimately produced a number of themes influence of norms take on a different hue when consid- that presents our interpretation of all the data collected. ering more formal organisations (for studies of organisa- As Braun and Clarke (2006) argue, because thematic tional compliance see, for example, Edelman and Talesh analysis is a flexible method of analysis when compared to 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 935 most other qualitative methods that have strict method- other forum users and understand which rules apply to their ological and philosophical underpinnings, it is important particular situation. Others who are generally familiar with for researchers to acknowledge their particular philosophy basic taxpaying rules may use online discussions to deter- in analysing the data; our stance in this particular study is a mine whether all general rules apply to their circumstances, realist one that assumes people’s talk is reflective of or if they can make use of exemptions or even set up business thoughts, attitudes, or motivations (Potter and Wetherell structures that are tax-effective. Therefore, our dataset 1987; for a discussion of the different epistemologies in showed two main distinct ways for taxpayers to approach thematic analysis, see Braun and Clarke 2006). laws and regulations: (1) making sense of existing rules; or (2) negotiating the legal landscape by understanding if rules apply to their circumstance and how to follow rules that are in Results and Discussion their favour. We briefly discuss these two types of approaching rules below. We begin by discussing the themes that emerged from our data analysis, and follow this presentation with a discussion Sense-Making Many of the online discussions analysed of the broad assumptions in the tax compliance literature began with a user requesting advice in making sense of tax we identified in the introduction—whether and how these rules, as illustrated by the comments below: assumptions are reflected in naturally occurring discussions 1. I have ABSOLUTELY no clue when it comes to this among taxpayers. sort of thing, I take it I have to register with [the tax authority] who will advise what I owe them. Can you Model and Findings guys give ANY advice on the matter or refer me to any books or articles. The results provide an overview of the content of dis- 2. I don’t know enough about exports from UK to US or cussions analysed. Figure 1 presents the data categories Canada. I began reading some tax documents but my and their relationships. Following presentation of the brain went into meltdown. Is there any import duty? model, we discuss each theme in detail, providing quo- I’d appreciate your advice? tations from the dataset to illustrate each of the themes (quotations have been paraphrased in order to maintain Many comments stress that they find tax complicated, confidentiality). and the general information provided by the tax authority or by accountants, confusing. The model presented in Fig. 1 serves to illustrate and organise the main themes in the dataset. To organise the 1. The [tax authority] website is so complicated, I could themes, we identified the main ‘actors’ in these tax dis- not find any information relating to small items of cussions, and then the sub-themes that reflect the rela- equipment. [query regarding allowable expenses]. tionship between the taxpayers and these ‘actors’. In the 2. Taxes are one of the things that give us headaches. process of dealing with his or her tax affairs, the taxpayer deals with (1) the laws and regulations relating to tax As such, a large number of comments are dedicated to compliance, (2) the tax authority, (3) tax practitioners, and laying out the rules in simple terms, sometimes discussing (4) the wider social network of the taxpayer (for example, and debating the accuracy of information presented. co-workers, members of the same professional group, 1. yes you have to pay tax—you have to register as if you family and friends, etc.). We focus below on how all these are selling work. ‘actors’ are reflected in the comments we analysed and on 2. V.A.T is not needed… in fact, it’s likely you won’t describing the relationship between the taxpayer and each need to be V.A.T. registered for the future either. of the ‘actors’. 3. How much you have to pay the taxman is irrelevant, not declaring income is a crime, whether for millions Laws and Regulations or pennies. [responding to a debate regarding a minimal income for registration]. The majority of comments (please see Table 1) included in The sense-making process does not only involve finding the analysis referred to tax laws, rules, regulations, such as requirements to register with the tax authority when trading, out what the rules are, but understanding the logic behind the rules. Such sense-making in which people learn that deadlines for payment, types of taxes due, etc., as well as recent legal changes. One of the main concerns of taxpayers rules are consistent with what they perceive to be accept- able standards of behaviour is likely to increase compliance interacting on the online forums was to make sense of laws and regulations, receive uncomplicated explanations from (Paine 1994). 123 936 D. Onu, L. Oats Fig. 1 Theoretical model under a different section and end up paying too much Table 1 Occurrence of instances of themes in the dataset tax. Main themes and sub-themes Occurrences Negotiation As outlined above, a large number of com- in dataset ments refer to the general rules of paying tax, typically Laws and regulations income tax. A different category of comments about laws Sense-making 345 and rules discusses potential exemptions and ways of using Negotiation 233 existing rules to pay less tax. Tax authority The simplest of cases refers to discussing exemptions Use expertise 37 (e.g. not having to pay tax for low earnings, etc.). Arbitrate 31 As for VAT, you wouldn’t have to have a VAT Manage image 7 number as long as your taxable earnings are under Tax practitioners £68,000 per year. […] When you are asked to provide Provide guidance 63 a VAT number you simply say that you are not VAT Social network registered. Legal information 82 Best practice advice 77 Other discussions refer to the most advantageous ways Persuasion 17 to save tax, for instance, by making sure all potential work- Support 15 related expenses are claimed, as illustrated below: Other topics of interest You have to register as sole trader in order to claim Audits 14 expenses. Which is best to do if you’re reporting Penalties 16 income—otherwise you’re handing them free tax Norms of professional 35 money! group Or, as shown in the example below, finding the most Each data point represents a contribution by a forum member. As such, each contribution may refer to several themes and be coded tax-efficient business structure: simultaneously as part of multiple categories What is the optimal way to sort out my TAX? 1. Invoice to job agency for my contract jobs from my You have to register as sole trader (self-employed) so Company […] 2. Register as employee with job agent that you can claim expenses. Which you want to do— […] 3. Any other way? otherwise you’re giving away free tax money! […] When you report income on your tax return, if you’re The instances where people attempt to find ways to be not registered as self-employed you’d have to put it more tax-efficient are placed on a continuum from the most 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 937 common-place practices (e.g. making sure one claims all Manage image Finally, a number of comments refer to allowable expenses), to more complicated ways to min- managing one’s image in relation to the tax authority, imise tax liability, some of which may even be considered acknowledging that decisions that a taxpayers is or not tax avoidance, such as a number of comments about how to compliant are in many cases subjective. There is the con- cern with what one’s actions may ‘look like’ to the tax avoid paying taxes illustrate: authority. 1. I just wondered whether artists need to pay tax on work 1. Also, consider the sum of the claim versus your total they sell, if so are there good ways to avoid it (apart from not declaring income), as I know you agree we self-employment income or expenses. If it’s small, it’s likely to be more acceptable. [For instance, all my trips seem pay tax on pretty much everything. Thanks. 2. Do I still have to pay the tax on work that I’ve picked are] only 6 % of my total annual expenses. So it doesn’t seem like I’m trying to pull a fast one. up from overseas? Thinking if there is any clause whereby I can avoid paying as much tax (hope!). 2. Then, when they get back to you I would be honest with them, […]. Be as proactive as possible and you might convince them you’ve goofed and you were not deliberately avoiding them. Tax authority Tax practitioners A significant number of comments mention the tax authority. We categorised three ways that taxpayers talk It should be noted that although a significant number of about the tax authority: (1) as a source of expertise about laws and regulations; (2) as an arbiter that people can comments mention accountants and tax practitioners, many of these question the need for self-employed individuals to contact to validate their interpretation of existing rules; and employ the service of an accountant. (3) as a subjective law enforcer in relation to which they manage their image as compliant taxpayers. 1. My first year as a freelancer just ended and I made no profit. […] Do I need an accountant or will I be able to Use expertise The tax authority is talked about as a fill in the online form without one? source of knowledge about tax laws and regulations; for the 2. No, you don’t need an accountant. You’ve got it most part, people report positive experiences receiving right—sum up the total sales, subtract the expenses and expertise and guidance from the tax authority, and then the result is the profit for taxing. encourage others to seek assistance. This second comment reflects the fragility of advice in 1. […], went to the local tax office and asked them for this arena; it is not actually correct. Of those that stress the help. They were fantastically helpful. […] They helped need for an accountant, however, the primary relationship me go through any and all tax liabilities, […]. I mean, with the taxpayer is to provide guidance, both in under- it was obvious I wasn’t a tax evader or avoider—I just standing the law and in finding tax savings. didn’t have a clue. 1. BUT it is not legal accounting advice. If in doubt, get 2. I’d highly recommend going through the [tax author- some proper advice. Even a small local accountant ity] site, or calling if you need help (the sole trader might give you a consultation cheaply. people are very helpful and friendly). 2. Your accountant will advise you if you have to register for VAT, so you don’t need to worry about that. This is Arbitrate When regulations are unclear or taxpayers feel assuming that your accountant does his job properly. these can be interpreted in a number of ways, they also relate to the tax authority as an arbiter that can rule whether it regards a certain practice as compliant or noncompliant, Social network such as in the example below: Finally, a significant number of comments refer to com- 1. No, seriously, logically thinking it should be fine but munication and interaction within the taxpayer’s social the cynicism of the taxman should not be underesti- network that is relevant to tax compliance. Taxpayers share mated. I think you should write to them, make your information specific to their network, share own experi- best case, then if they don’t take it as a joke & reply in ences and advice about how to best deal with taxes, and writing to give you the go ahead you’re covered. may also try to influence other taxpayers to be compliant, 2. Oh, in that case, I would get it confirmed in writing and generally offer support to those who feel anxious. [from the tax authority] if I were you. 123 938 D. Onu, L. Oats Legal information As outlined above, most comments make in the tax compliance literature. As outlined in the refer to tax rules. However, there is an important aspect of introductory section, we are not the first to question these how rules are communicated in specific social groups, such assumptions, but we attempt to provide empirical support as the occupational group. Many taxpayers want to receive based on analysing naturally occurring data. We discuss information from those in the same occupation and to below our findings in relation to each assumption in turn. follow the practice of the occupation—this denotes a role 1. Regarding tax behaviour, people’s chief concern is not for the norms in the professional group for tax compliance. to decide whether to comply or not Although the 1. I guess I should go and talk to the tax office nearer the overwhelming majority of studies looking at tax time but I wanted to speak to other artists first and see behaviour have focused on tax compliance and the what they do. compliance decision, the main concern of taxpayers in 2. The other nurses I work with have said that transport and our dataset is to find out how to comply, to understand meals are allowable expenses and that they’ve claimed and navigate the complex legal landscape. Their chief for years successfully and have not been audited. concern is to make sure they are compliant, rather than to understand how to evade taxes. A relatively small number of cases do discuss practices that may be Best practice advice Through interacting with others, considered tax avoidance (see also ‘creative compli- taxpayers do not just learn about tax laws, but receive ance’, McBarnet 2004), the concern being to make advice from those more experienced, for example, how to sure one is compliant with legislation but significantly keep track of their expenses, how to find a suitable ac- minimises his or her liability. countant, and so on. Regarding all taxpayers as potential evaders has been 1. Get an accountant—Switch to part time, or get a night described as a bias in the tax behaviour literature job while you start things up—Don’t assume a good (Kirchler 2007). The focus on tax compliance deci- April will mean a good May, things are quite sions is also reflected by the few studies that look at tax seasonal—Mates rates don’t exist—[etc.] communication, which propose that taxpayers who talk 2. I only keep a simple cash book, and use one page for about tax exchange information about ways to evade ‘‘Money in’’ and another page for ‘‘Money out’’. tax and avoid detection (Stalans et al. 1991), about the frequency of audits and other people’s evasion behaviour (Hashimzade et al. 2013), and who has Persuasion Social networks do not only serve to transmit been audited in one’s social network (Rincke and information—some people actively try to influence others’ Traxler 2009), all of which are topics that feed directly actions, especially when compliance decisions are into compliance decisions. While we accept that involved. taxpayers may communicate about these topics, our 1. If you are not paying tax, as you previously said, then dataset suggests that their overwhelming concern is to it is only a matter of time before they get to you and make sense of the rules of tax compliance in order to recover what is owed. make sure they are compliant, rather than request 2. He needs to deal with it [sort out his tax affairs]. Once information that will help them evade without detec- the weight is lifted off his shoulders he will feel much tion or penalty. Our dataset suggests that the acquisi- better. tion of tax knowledge is more central than the compliance decision to the tax behaviour of the majority of taxpayers—a majority who are motivated Support Finally, social networks serve as support through to be compliant and not concerned with ways to evade the often stressful taxpaying process, as illustrated by the taxes. Our findings suggest that the majority of comment below. taxpayers are compliant; this conclusion echoes wider However, I really wouldn’t worry that much about it. I debates regarding business ethics. An increasing am sure that it happens a lot. I don’t know the answer number of authors suggest that the ethical behaviour but there are lots of people on here who know about this of business leaders cannot be fully understood through type of thing so one of them should be able to help. the lens of a rational actor maximising her or his own utility—this leads to an underestimation of ethical Assumptions in the Tax Compliance Literature behaviour. Instead, many business leaders are driven by ethical principles and values (e.g. Bazerman and We set out with the intention to see whether and how our Tenbrunsel 2011; Gentile 2010; Messick and Bazer- findings match the broad assumptions researchers often man 1996), although they may possess or report an 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 939 inflated sense of their own ethics (Randall and Indeed, more comments in our dataset referred to Fernandes 1991). communication with people in one’s professional 2. Compliance is not a binary variable In relation to the group or friends and family, and the involvement of compliance decision, the tax compliance literature has tax practitioners, than comments that referred to the widely regarded tax compliance as a binary variable tax authority. Although there has been some interest in with two potential outcomes: compliant and noncom- the role of tax practitioners (Gracia and Oats 2012; pliant (Kirchler and Wahl 2010; McBarnet, 2004). Hite and Hasseldine 2003; Roberts 1998; Stephenson Considering compliance as a binary decision has 2010) and taxpayer social networks (e.g. Beers et al. important advantages for its measurement; however, 2013; Hashimzade et al. 2013; Ashby and Webley compliance behaviour is in reality much more complex 2008), more research is needed to understand the role than a decision between evasion and full compliance of practitioners and of other taxpayers in taxpayer (Braithwaite 2009). As discussed above, compliance in behaviour. our dataset takes a number of forms, including finding 4. Taxpayers are seldom concerned with audit rates and ways to drastically minimise tax liability while com- penalty levels Given the classic model of tax compli- plying with the law. In this respect, our dataset echoes ance decisions based on appraisals of audit probability other authors in that compliance and noncompliance and penalty levels (Allingham and Sandmo 1972), we can take many qualitatively different forms and that would expect high concern in the online discussions studying taxpaying decisions as a binary choice with these variables. While audits and penalties may be between compliance and evasion does not reflect the of interest to taxpayers, they are usually unknown; tax complex reality of behaviour (e.g. Braithwaite 2009; authorities do not usually disclose the number of audits Kirchler and Wahl 2010). carried out, and while penalty levels are public, they Not only does compliance take many forms, tax are unknown to many taxpayers (Barham and Fox evasionisalsomuchlessclear in realitythanthe way 2011). As such, in order to estimate the likelihood of it is measured in tax experiments. Since evasion audits, people may seek information about recent audits in their social network (Hashimzade et al. 2013). relates to a person’s conscious intention to evade taxes, this personal intention is difficult to assess and If penalty levels and audit likelihoods were essential to distinguish from simple calculation error. As such, tax behaviour, we would expect people to also seek assigning to a taxpayer who has filled in a tax return information online from peers about audits and penal- the intention to evade may constitute a subjective ties. However, comments that mention audits are decision of tax inspectors (Boll 2013). This concern relatively few; of these, for the most part, audits are with the subjectivity of tax evasion judgements is mentioned as a general deterrent, with no reference to apparent in the online discussions, where people likelihood (see Table 1). comment on how to make sure honest mistakes are The largest risk if you don’t declare fully is that the not interpreted as intentional evasion by tax inspec- tax office will calculate your liability based on similar tors. businesses and issue you with the bill plus fines. It becomes apparent that research looking at compli- ance as a binary outcome (full compliance versus evasion) may lack relevance for the way that com- No comments mention people discussing having been audited pliance plays out in reality, in its many forms shaped or others’ experience of audits. Only a very small number are by the interaction of taxpayers, tax practitioners, and concerned with the cost-benefit analysis of evasion: the tax authority. We hope that future research addresses this gap by looking at the many forms of It depends on the risk you want to take! In my opinion, compliance, including tax avoidance, and also look- it’s not worth the risk if your earnings are small. ing at distinguishing between honest error and evasion intention. It is interesting to observe the term ‘risk’ used in this context. 3. The taxpayer and the tax authority are not the only While there is much debate about tax risk management in the main actors As Pickhardt and Prinz (2013) argue in context of large business taxpayers (see, for example, their review of tax compliance literature, the main Lavermicocca 2011; Mulligan and Oats 2009), there is no interaction studied in the literature concerns the private research dealing with this aspect of individual compliance. relationship between the taxpayer and the tax author- Importantly, although some people mention penalties in ity; however, other actors may be as important or even general as deterrent, only one instance discusses the actual more important for understanding tax behaviour, such penalty level, and this is a late-filing penalty. as tax practitioners or the taxpayer’s social network. 123 940 D. Onu, L. Oats 5. Alternatively, some taxpayers base their decisions on sense of existing regulations. In this sense-making process, social norms An alternative to the view that people the tax authority, tax practitioners, and the wider social comply due to existing deterrents is that people comply networks all play an important role. Second, and perhaps due to existing norms against evasion, being motivated to more interesting, taxpayers seek to negotiate compliance conform to what other people like themselves do (Onu boundaries. Many taxpayers seek to understand the various and Oats 2015a; Wenzel 2004). People may be influenced ways of being compliant and choose that which is most by a multitude of norms, such as national norms, family efficient for their business. In this process, they rely on norms, workplace norms, etc. Since we sourced data from their social network to seek out all the alternatives avail- discussion forums for particular professions, the most able to them and they rely on the tax authority to arbitrate relevant norms are those in the professional groups (e.g. whether their arrangements are in line with regulations. norms in the hairdressing industry, norms in the IT They also seek out existing norms and practices in their industry, etc.). A number of comments in the dataset refer relevant groups (e.g. profession) when deciding how to to the professional group as relevant for tax behaviour, in handle their tax affairs. Taxpayers do not only negotiate particular as a source of specialised knowledge about being compliant by the way they organise their tax affairs practice in the profession (Ashby et al. 2009). There is but also by managing their image as honest taxpayers in very little indication in our dataset that people discuss relation to the tax authority. A small number of the tax- norms in terms of approval/disapproval of evasion (i.e. payers in our dataset display noncompliant stances and injunctive norms, Cialdini and Trost 1998), but only seek approval in their social network. Further to helping norms understood as current practice in the profession taxpayers understand and negotiate tax regulations, the (i.e. descriptive norms). wider social network also performs other functions: pro- viding general best practice advice in relation to dealing Any artists who know the answer? How do you enter with tax obligations, persuading defiant taxpayers to equipment in your accounts? become compliant, and general social support. Some of the processes highlighted above have been Although we cannot tell from analysing the comments addressed by past research, such as the acquisition of tax whether discussions about current norms in the profession knowledge (e.g. Alm et al. 2010) or the role of social influence behaviour, these types of norms are most likely to norms in tax behaviour (e.g. Bobek et al. 2007; Wenzel influence people when tax rules are ambiguous (Cialdini 2004). However, other processes have received less atten- and Trost 1998). The influence of social norms in the tion. For instance, the fact that taxpayers discuss ways to profession on compliance relates more widely to organi- appear honest so that they are not considered noncompliant sational ethical behaviour, where compliance with organ- highlights the way that compliance is negotiated in the isational rules of conduct and the law is chiefly influenced relationship between the taxpayers and the tax inspector by the existence and promotion of an ethical culture in (see also Boll 2013). In addition, compliance is influenced organisations (National Business Ethics Survey 2013; see by the social network, as taxpayers seek to influence and also Parker 2000). persuade other taxpayers to comply with regulations (see also Onu and Oats 2015b). The analysis also stresses the various ways in which taxpayers negotiate compliance Conclusion based on information received from practitioners, tax authority, and the wider social network. Compliance is not Our study introduces the analysis of naturally occurring online discussions to the study of tax behaviour. We set out clear-cut and a priori defined; it is negotiated in an envi- ronment of existing norms and practices (see also Gracia to explore discussions about tax among freelancers and and Oats 2012). This conclusion is not only relevant to tax small business owners. We found that the ‘universe’ of tax compliance, but highlights more broadly that ethical busi- behaviour as reflected in these online discussions is dom- ness behaviour is not only guided by abstract regulations, inated by the need to acquire knowledge about tax laws and but it is also socially situated and negotiated between regulations, knowledge that will help taxpayers be com- various actors (e.g. regulators, advisors, wider professional, pliant, but that may also allow them to organise their tax and social network) (Donaldson and Dunfee 1994). affairs in the most efficient way. Several actors play an In addition to analysing the ‘universe’ of taxpayers’ important role—the tax authority, tax practitioners, and the concerns as they appear in spontaneous discussions, we set wider social network of the taxpayer. out to compare these findings to the focus of the tax Our analysis highlights several ways in which taxpayers relate to their tax obligations. First, taxpayers seek to make behaviour literature. Our primary finding is that most 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 941 taxpayers seem to be unconcerned with the compliance and propose that other topics may be essential to under- decision; they are motivated to comply and their main standing the experience of the majority of compliant tax- concern is to seek information about how to be compliant. payers. Such avenues include further research into people’s However, the focus of the literature on tax behaviour has acquisition and understanding of complex tax regulations, overwhelmingly been on tax compliance decisions (for a and the role of taxpayers’ social networks and their tax review, see Kirchler 2007). We do not aim to question the practitioners in this process. Also, a deeper understanding validity of research into tax compliance decisions, but of the different manifestations of compliance is desirable to rather to question whether taking a compliance decision is focusing on the dichotomy of compliance–evasion. relevant to most taxpayers. When compliance is actually The focus of research on tax behaviour has important discussed, it appears far from a straight-forward binary practical implications for informing tax authority activities. decision between full compliance and evasion. People may A research field focused on the evasion decision will advise be motivated to be compliant but may misunderstand their tax administrations to focus on audits, publicising large obligations or make errors; although they may have not had penalties, or ‘naming and shaming’ evaders, and support an the intention to evade, they discuss the subjective nature of ‘enforcement’ paradigm in dealing with taxpayers (Alm judgements made by tax inspectors regarding their inten- et al. 2010). However, the academic focus on deterring tions. People also discuss ways to minimise their tax lia- evasion will bring little contribution to all those areas of bility, including practices that could be considered tax tax administration that affect the large majority of com- avoidance. Our analysis of comments not only suggests pliant taxpayers, areas such as educating people about their that most taxpayers are concerned with being compliant, tax obligations, making sure they are confident enough to but that there are many qualitatively different forms of approach authorities, that they find it easy to comply. compliance. For the most part, the tax compliance literature Despite the fact that ‘the service approach’ is increasingly has focused on the dichotomy between compliance and at the core of tax administrations around the world, few evasion. Our analysis, however, suggests that this might be academic researchers conduct research to inform how to overly reductionist if we are to explain compliance in ‘the support compliant taxpayers (for an exception, see, for real world’, and supports calls for understanding the mul- example, Alm et al. 2010). Although our analysis has dealt tiple types of compliance (see also Boll 2013; Braithwaite with the compliance of individuals, similar analyses of 2009; Kirchler and Wahl 2010). An understanding of tax online discussions may be helpful to understand attitudes behaviour beyond the dichotomy of compliance/noncom- and opinions related to the tax compliance of large tax- pliance should be of particular interest to policy makers payers (see, for example, Christians 2012; Datt 2014). who seek to understand practices such as ‘aggressive tax It is important to note that our study relies on people’s public discussions, and it is likely that people may discuss planning’ or ‘tax avoidance’ as they are negotiated in practice (see Gracia and Oats 2012). compliance decisions to a larger extent in private settings. We also looked at whether people are concerned with This limitation is common to all other studies of tax com- finding out about audits and penalties, or social norms pliance that rely on self-report, such as those employing regarding evasion, as suggested by the compliance litera- interviews, large-scale surveys, or experiments where com- ture (see Allingham and Sandmo 1972; and Wenzel 2004, pliance behaviour is observed; given that tax evasion is often respectively). We found little evidence of people being perceived as immoral and illegal, people are reluctant to concerned with finding out about audit probabilities or admit to noncompliance to peers or to a researcher. Despite penalty levels. There was also little evidence of people this limitation, self-reports are central to tax compliance discussing their approval or disapproval (i.e. injunctive research and many seminal works in the field rely on self- norm) of tax evasion. However, some people did discuss report measures. And although there is debate regarding the what others do (descriptive norm, Bobek et al. 2007)in extent to which self-reports reflect people’s behaviour, self- relation to their tax affairs and taxpayers are even actively reports are considered to be very useful albeit imperfect encouraged to comply (see also Onu and Oats 2015b). proxies for actual compliance behaviour (for a discussion, These findings are indicative of the fact that the wider see Elffers et al. 1992). Although our study employs self- social environment can have a positive effect on business report, we use naturally occurring discussion among peers, ethical decisions (Christie et al. 2003). It is important to which often provide more accurate reflections of actual note that our conclusion does not aim to question the behaviour than self-reports given in interviews or surveys validity of previous research on the effect of deterrence because they avoid the researcher biasing responses factors on tax behaviour on those people who do indeed (Wetherell et al. 2001;Wooffitt 2005). consider evading, but to question whether many people It is also important to note that we do not aim to provide consider evasion at all. Our aim is thus to question the conclusions that are representative of all taxpayers. Our focus of research on tax behaviour on evasion decisions dataset is limited to self-employed professionals and 123 942 D. Onu, L. Oats Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A owners of very small businesses, who carry out their theoretical analysis. Journal of Public Economics, 1, 323–338. business in the UK and who are accustomed to interacting Alm, J., Cherry, T., Jones, M., & McKee, M. (2010). Taxpayer in an online environment. Nonetheless, it is likely that the information assistance services and tax compliance behavior. content of communications about tax between these pro- Journal of Economic Psychology, 31(4), 577–586. doi:10.1016/j. joep.2010.03.018. fessionals is similar to those like them operating in other Alm, J., McClelland, G. H., & Schulze, W. D. (1999). Changing the countries, or discussing tax in other types of public fora. social norm of tax compliance by voting. Kyklos, 52(2), People who run more established businesses or those with 141–171. doi:10.1111/j.1467-6435.1999.tb01440.x. particular knowledge of tax may display different beha- Alm, J., Sanchez, I., & de Juan, A. (1995). Economic and noneconomic factors in tax compliance. Kyklos, 48(1), 3–18. viour. 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J Bus Ethics (2018) 149:931–944 https://doi.org/10.1007/s10551-016-3032-y Tax Talk: An Exploration of Online Discussions Among Taxpayers 1 1 Diana Onu Lynne Oats Received: 29 January 2015 / Accepted: 18 January 2016 / Published online: 19 February 2016 The Author(s) 2016. This article is published with open access at Springerlink.com Abstract We present an analysis of over 400 comments Introduction about complying with tax obligations extracted from online discussion forums for freelancers. While the topics inves- Whether you can observe a thing or not depends on tigated by much of the literature on taxpayer behaviour are the theory which you use. It is the theory which theory driven, we aimed to explore the universe of online decides what can be observed. (Albert Einstein). discussions about tax in order to extract those topics that While Einstein’s observation referred to quantum are most relevant to taxpayers. The forum discussions were mechanics, it is none less true for any field of knowledge subjected to a qualitative thematic analysis, and we present where systematic empirical testing of theory is central, a model of the ‘universe’ of tax as reflected in taxpayer including economics and social sciences. Theoretical discussions. The model comprises several main actors (tax frameworks focus researchers on specific variables, and in laws, tax authority, tax practitioners, and the taxpayer’s turn these researchers collect and analyse those data that are social network) and describes the multiple ways in which relevant to understanding their variables of interest. While they relate to taxpayers’ behaviour. We also conduct a such systematic testing of theory is essential, it also means more focused analysis to show that the majority of tax- that certain data are never observed because they are not the payers seem unconcerned with many of the variables that focus of current theories. In this paper, we explore one par- have been the focus of tax behaviour research (e.g. audits, ticular field of study and attempt to reveal such data that have penalties, etc.), and that most people are motivated to be escaped systematic observation due to the focus of current compliant and are more concerned with how to comply theories in the field: the study of taxpayer behaviour. than whether to comply. Moreover, we discuss how these When the Australian billionaire and media tycoon Kerry ‘real-world’ tax discussions question common assumptions Packer was asked about his tax affairs during a public in the study of tax behaviour and how they inform our inquiry, he said, ‘‘Now, of course, I am minimizing my tax, understanding of business ethics more generally. and if anybody in this country doesn’t minimize their tax they want their heads read’’. While Kerry Packer’s position Keywords Tax behaviour  Tax compliance  Tax may seem controversial to some, it will seem natural to evasion  Online discussion  Thematic analysis others; in the research environment, ‘head-reading’ efforts have attempted to establish the factors that explain this variation in how people make tax compliance decisions (for recent literature reviews, see Hashimzade et al. 2013; Kirchler 2007; Pickhardt and Prinz 2013). Tax behaviour research has seen contributions from & Diana Onu various disciplines, approaches, and theoretical positions. d.onu@exeter.ac.uk However, the field has been dominated by theoretical and Tax Administration Research Centre, Business School, laboratory-based research, research that is primarily driven University of Exeter, Streatham Court, Rennes Drive, by researchers’ assumptions (see Boll 2013; Oats 2012). Exeter EX4 4ST, UK 123 932 D. Onu, L. Oats The mainstream approach has been to test theoretically tax evasion decisions has come to be known as the ‘classic derived models of behaviour empirically, usually by eliciting model’ of tax compliance (Allingham and Sandmo 1972; people’s responses to a task (e.g. filling in a questionnaire, Yitzhaki 1974). Many authors subsequently noted the failure taking part in an experiment, etc.). Our approach in this paper of the classic model to predict realistic evasion levels (see is very different: we collect and analyse naturally occurring Andreoni et al. 1998), and several attempts have been made data on tax behaviour (online discussions) in a qualitative to improve the model (for a review, see Hashimzade et al. manner. We look at how people’s discussions confirm what 2013), for instance by considering the role of social norms in we know about tax behaviour, and also if there are differ- deterring tax evasion (Myles and Naylor 1996). ences between how people talk about tax ‘in the real-world’ As with many branches of applied economics, the per- and current results and assumptions in the literature. ceived failure of the ‘classic model’ based on taxpayers as Some of our findings are in line with previous thinking rational actors was noted by behavioural economists (see about tax compliance behaviour; other findings indicate the Alm et al. 1995). Many behavioural studies instead framed need to revisit assumptions we make about phenomena we evasion decisions in the context of public goods games (i.e. study. But, most of all, our interrogation of naturally tax is seen as something that all benefit from; however, occurring discussions reveals some blind spots in research individuals may be tempted to evade paying their share and on tax behaviour. We will dedicate the largest part of this still get a share of everyone else’s contribution). Studies paper to discussing findings of the analysis and their rela- looked at how different variations of the public goods game tionship with existing literature. Beforehand, we make a alter people’s decision to evade contributing to the public brief incursion into research on tax compliance to serve good; such variations include, for example, participants those readers less familiar with this field. having agency over penalty levels (Alm et al. 1999), the role of different tax rates for income brackets (Bosco and Mittone 1997), and others. Very Brief Overview of Tax Compliance Research The first works to look at tax compliance as an individual Broad Assumptions in the Tax Compliance psychological decision were published by Gu ¨ nter Literature Schmolders from the 1950s onwards (see, for instance, Schmo ¨ lders 1959). Although an economist himself, As pointed out elsewhere (Oats 2012), the vast majority of Schmolders (1959) advocated the need to use psychology works looking at tax compliance are situated in a posi- to understand fiscal behaviour, and he was particularly tivistic research paradigm, that is, they employ systematic interested in how people make compliance decisions based data collection (e.g. survey, experiment) and/or mathe- on their values or belonging to certain social groups (pro- matical analyses to validate research hypotheses. While fession, ‘social class’, etc.). A number of later works this approach has clear benefits in providing rigorous answered his call, constructing models of tax compliance answers, its drawback is that hypotheses rely heavily on that would take into account the variety of psychological researchers’ assumptions of what is important for tax and social factors involved in compliance decisions (e.g. behaviour. To give one example, as outlined above, personal values, attitudes, social norms, peer effects, and Allingham and Sandmo (1972) posit that audits and other such factors) (see, for example, Lewis 1982; Weigel penalties are essential to understanding compliance deci- et al. 1987; for an overview, see Webley 1991). More sions. As such, researchers’ theoretical and empirical recently, psychologists studying tax behaviour have looked analyses will become geared towards refining our under- in depth at several psychological factors related to com- standing of the role of audits and penalties. They, however, pliance, such as social norms (e.g. Wenzel 2004), percep- tell us nothing about the validity of our initial assumptions tions of tax authorities (e.g. Kirchler et al. 2008), stance that audits and penalties are indeed important for the tax towards authorities and government (Braithwaite 2009), behaviour of most individuals. In a laboratory experiment, and even the ‘mental accounting’ involved in dealing with changing audit rates may produce an important effect on one’s tax affairs (Adams and Webley 2001). behaviour because we control the effect of all other factors, A different stream of tax compliance research was but in ‘the real-world’, outside the lab, audit rates may be developed in economics in the early 1970s on the foundation one of the least important things considered by taxpayers. of Gary Becker’s (1968) economics-of-crime model, a In the current study, we attempt to provide an exploration model that posits that criminal decisions can be viewed as of what is important for taxpayers ‘in the real-world’, and rational choices: criminals weigh up the level of penalty and compare the results of this exploration with current the probability of being caught, and make a rational decision assumptions in the tax compliance literature. Before we following a cost-benefit analysis. This approach applied to describe our approach and method, we discuss below some 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 933 specific assumptions that are common in tax compliance 4. Taxpayers are concerned with audit rates and penalty research. levels As several authors have noted (e.g. Andreoni 1. Regarding tax behaviour, people’s chief concern is et al. 1998; James and Alley 2002; Kirchler 2007), the deciding whether to comply or not Most research has field of tax compliance has been dominated by the economics-of-crime approach to tax evasion (Alling- been geared towards understanding the tax compliance decision: to evade or not to evade (for reviews, see, for ham and Sandmo 1972), that is, that taxpayers make evasion decisions following a cost-benefit analysis that example, Andreoni et al. 1998; Kirchler 2007; Pick- hardt and Prinz 2013). However, in reality, many takes into account the income loss if caught evading (penalty) and the probability of being caught (audited). taxpayers do not know and struggle to find out how to comply, rather than whether to comply, spending time In this paradigm, raising penalty levels and conducting on deciphering the complexity and abstractness of the more audits produces higher compliance levels; often tax code (Alm et al. 2010). Tax authorities estimate called the deterrence approach (Alm and Torgler that a large section of people are willing to comply but 2011), this paradigm stresses the importance of do not know how to do so, a much larger proportion people’s assessment of penalty and audit levels for than people who would contemplate breaking the law compliance decisions. 5. Alternatively, taxpayers base their decisions on social (‘‘SME Customer Segmentation’’, 2010). Certainly, it is essential to study the compliance decision, but other norms Many have noted the failure of the deterrence model to explain why some people would not evade processes may be just as important in taxpaying behaviour. In reality, the compliance decision may be taxes even if penalties and audits never existed (e.g. irrelevant for a large swathe of taxpayers. Wenzel 2004), as well as its failure to predict the high 2. Compliance is a binary variable In order to opera- compliance levels observed in reality (Andreoni et al. tionalise the tax compliance decision as simply as 1998). As such, to explain why compliance levels are possible, the vast majority of studies of tax compli- higher than expected, many researchers propose that ance assume two distinct options for the individual: to social norms account for why so many people comply evade or to be fully compliant. However, as some when the ‘rational’ choice would be to evade. Evasion have pointed out, ‘real-world’ compliance is far from is thought to be mitigated by strong norms against evasion (e.g. Bobek et al. 2007; Wenzel 2005), binary. The complexity of compliance is illustrated by the existence of different types of compliance (e.g. whether that is because people fear the negative consequences of reputation loss (Myles and Naylor voluntary versus enforced compliance, see Braith- waite 2009; Kirchler and Wahl 2010), or by situations 1996) or because strong norms signal that most other taxpayers are willing to contribute to the public goods of taxpayers taking advantage of legal ‘grey areas’ to drastically minimise tax while still complying with (Frey and Torgler 2007). the letter of the law (tax avoidance, Kirchler and Wahl 2010; creative compliance, McBarnet 2004). While tax evasion may be defined as evading taxes The Current Study with intent (McBarnet 2004), it maybeverydifficult to determine whether misreporting on a tax return is As outlined above, certain broad assumptions seem to due to evasion intent or error. In the attempt to underpin much of research on tax compliance. However, simplify compliance to a binary decision for research there is little exploration of the extent to which these purposes, it may be that such simplification bears assumptions are relevant for tax behaviour as a whole. As little resemblance to the complexity of realistic tax we briefly discussed, there is reason to doubt that some of compliance behaviour. these assumptions readily reflect the reality of paying tax 3. The taxpayers and the tax authority are the main for many individuals. To explore individuals’ reality in actors The majority of studies have looked at the depth, qualitative methods of inquiry may prove more relationships between taxpayers and the tax authority, effective (for an overview of qualitative methods in tax to the detriment of other ‘actors’ such as peer groups, research, see Oats 2012), particularly when the researcher accountants and legal advisors, etc. (for a review, see is merely observing tax compliance processes without Pickhardt and Prinz 2013). Although it may seem that intervening (as opposed to, for instance, surveying tax- the actions of tax authorities are most important for tax payers). Observation of naturally occurring behaviour has compliance (i.e. by employing certain audit strategies, been used extensively in the social sciences (for an having a customer-focused approach, etc.), research example of ethnographic observation of tax audits, see Boll has not focused in as much detail on the role of other 2013). In this study, we collect and analyse naturally ‘actors’. 123 934 D. Onu, L. Oats occurring interactions, but in an online environment (what 2011; Parker 2000). Third, we chose online discussion is sometimes termed ‘netnography’ in business and forums as opposed to other social media because discus- organisational studies, see Kozinets 2002; see also Garcia sions on these forums tend to be more elaborate than those et al. 2009; Hine 2000). We present an analysis of dis- usually posted on social networking sites, allowing more cussions about tax on online forums for self-employed depth to the analysis. individuals; this analysis is not focused by particular We chose to focus on the UK rather than include more hypotheses—it is an open exploration of the tax behaviour countries because narrowing the focus allowed a more ‘universe’ as reflected in people’s discussions about tax. comprehensive data collection strategy. Although we do We chose the virtual ethnographic approach given sev- not make any claims regarding how representative the eral advantages it presents. First, the approach allows us to comments collected are for all discussions about tax among collect data that have not been generated by a researcher UK self-employed professionals, we have endeavoured to and that reflect people’s naturally occurring concerns. select the most prominent forums for a range of occupa- Second, it provides some insight into taxpayers’ attitudes tions, and included all comments about tax on those for- and opinions. People often discuss online with a high ums. Most of the comments included in the analysis were degree of self-disclosure, including sensitive topics, par- collected on a general discussion forum for freelancers, but ticularly when they address those they feel connected to we also aimed to include specialised forums for particular (e.g. peers in the same profession), as opposed to disclosing professions (those included here are forums for artists, to a researcher in a one-off survey or interview. Third, designers, construction industry professionals, nurses, online communication is less hierarchical and may thus doctors, beauticians and hairdressers, and IT contractors). allow more freedom of expression than traditional research The selection of these groups, however, is not intended to settings that place the researcher in an expert position (for imply that behaviour in these groups is different from the overviews, see Hine 2013; Kozinets 2015). wider population. To make sure we include all potentially relevant dis- cussions, we selected from the relevant forums all the Method discussions that contained the term ‘tax’, and subsequently eliminated from the dataset only those where ‘tax’ was Data Collection used to refer to something other than taxation (e.g. people using ‘taxing’ to mean ‘demanding’). Data were collected The dataset analysed consists of over 400 user comments in late 2013–early 2014, but some of the comments were about tax on discussions forums for self-employed profes- posted as early as 2003, although most were much more sionals in the UK. The dataset comprises 144 conversations recent. All the information collected is publicly available, on these forums: a forum user asks a question or raises an and did not require the researcher to register as a forum issue related to tax which is followed by other users replying, user in order to access it. debating, advising, sharing their own experience, etc. These online forums are not specialised tax forums, but general Thematic Analysis forums for individuals who work as freelancers and/or run micro-businesses, where individuals will discuss a wide To analyse the conversations, we employed thematic range of issues (e.g. how to start and run a business, how to analysis (Braun and Clarke 2006). Considered the most advertise products, etc.), including legal issues and taxation. widely used qualitative analysis method, thematic analysis This particular data collection strategy was preferred for provides a systematic approach to extract meaning from several reasons. First, we focused on general forums rather text data (Braun and Clarke 2006). We used qualitative than those specialised on tax issues because we aimed to analysis software (NVivo), and began by open-coding all collect conversations relevant to people who have no the comments in the dataset (i.e. a process of assigning a expertise or keen interest in taxation. Second, we chose to label to each comment relevant to its content, for instance focus on self-employed individuals, as they represent a ‘tax authority’ or ‘fine’). This process allowed the creation relatively simple case for understanding tax compliance. of a set of categories that were further refined, that is, This contrasts with taxation in small or even medium-sized similar themes were merged, or large and heterogeneous businesses where decisions are more complex, often being themes were split into sub-themes. This iterative process of distributed among directors, involving a larger number of refining categories while ensuring they are true to the taxes, etc. Mitigating factors such as reputation loss and the underlying data ultimately produced a number of themes influence of norms take on a different hue when consid- that presents our interpretation of all the data collected. ering more formal organisations (for studies of organisa- As Braun and Clarke (2006) argue, because thematic tional compliance see, for example, Edelman and Talesh analysis is a flexible method of analysis when compared to 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 935 most other qualitative methods that have strict method- other forum users and understand which rules apply to their ological and philosophical underpinnings, it is important particular situation. Others who are generally familiar with for researchers to acknowledge their particular philosophy basic taxpaying rules may use online discussions to deter- in analysing the data; our stance in this particular study is a mine whether all general rules apply to their circumstances, realist one that assumes people’s talk is reflective of or if they can make use of exemptions or even set up business thoughts, attitudes, or motivations (Potter and Wetherell structures that are tax-effective. Therefore, our dataset 1987; for a discussion of the different epistemologies in showed two main distinct ways for taxpayers to approach thematic analysis, see Braun and Clarke 2006). laws and regulations: (1) making sense of existing rules; or (2) negotiating the legal landscape by understanding if rules apply to their circumstance and how to follow rules that are in Results and Discussion their favour. We briefly discuss these two types of approaching rules below. We begin by discussing the themes that emerged from our data analysis, and follow this presentation with a discussion Sense-Making Many of the online discussions analysed of the broad assumptions in the tax compliance literature began with a user requesting advice in making sense of tax we identified in the introduction—whether and how these rules, as illustrated by the comments below: assumptions are reflected in naturally occurring discussions 1. I have ABSOLUTELY no clue when it comes to this among taxpayers. sort of thing, I take it I have to register with [the tax authority] who will advise what I owe them. Can you Model and Findings guys give ANY advice on the matter or refer me to any books or articles. The results provide an overview of the content of dis- 2. I don’t know enough about exports from UK to US or cussions analysed. Figure 1 presents the data categories Canada. I began reading some tax documents but my and their relationships. Following presentation of the brain went into meltdown. Is there any import duty? model, we discuss each theme in detail, providing quo- I’d appreciate your advice? tations from the dataset to illustrate each of the themes (quotations have been paraphrased in order to maintain Many comments stress that they find tax complicated, confidentiality). and the general information provided by the tax authority or by accountants, confusing. The model presented in Fig. 1 serves to illustrate and organise the main themes in the dataset. To organise the 1. The [tax authority] website is so complicated, I could themes, we identified the main ‘actors’ in these tax dis- not find any information relating to small items of cussions, and then the sub-themes that reflect the rela- equipment. [query regarding allowable expenses]. tionship between the taxpayers and these ‘actors’. In the 2. Taxes are one of the things that give us headaches. process of dealing with his or her tax affairs, the taxpayer deals with (1) the laws and regulations relating to tax As such, a large number of comments are dedicated to compliance, (2) the tax authority, (3) tax practitioners, and laying out the rules in simple terms, sometimes discussing (4) the wider social network of the taxpayer (for example, and debating the accuracy of information presented. co-workers, members of the same professional group, 1. yes you have to pay tax—you have to register as if you family and friends, etc.). We focus below on how all these are selling work. ‘actors’ are reflected in the comments we analysed and on 2. V.A.T is not needed… in fact, it’s likely you won’t describing the relationship between the taxpayer and each need to be V.A.T. registered for the future either. of the ‘actors’. 3. How much you have to pay the taxman is irrelevant, not declaring income is a crime, whether for millions Laws and Regulations or pennies. [responding to a debate regarding a minimal income for registration]. The majority of comments (please see Table 1) included in The sense-making process does not only involve finding the analysis referred to tax laws, rules, regulations, such as requirements to register with the tax authority when trading, out what the rules are, but understanding the logic behind the rules. Such sense-making in which people learn that deadlines for payment, types of taxes due, etc., as well as recent legal changes. One of the main concerns of taxpayers rules are consistent with what they perceive to be accept- able standards of behaviour is likely to increase compliance interacting on the online forums was to make sense of laws and regulations, receive uncomplicated explanations from (Paine 1994). 123 936 D. Onu, L. Oats Fig. 1 Theoretical model under a different section and end up paying too much Table 1 Occurrence of instances of themes in the dataset tax. Main themes and sub-themes Occurrences Negotiation As outlined above, a large number of com- in dataset ments refer to the general rules of paying tax, typically Laws and regulations income tax. A different category of comments about laws Sense-making 345 and rules discusses potential exemptions and ways of using Negotiation 233 existing rules to pay less tax. Tax authority The simplest of cases refers to discussing exemptions Use expertise 37 (e.g. not having to pay tax for low earnings, etc.). Arbitrate 31 As for VAT, you wouldn’t have to have a VAT Manage image 7 number as long as your taxable earnings are under Tax practitioners £68,000 per year. […] When you are asked to provide Provide guidance 63 a VAT number you simply say that you are not VAT Social network registered. Legal information 82 Best practice advice 77 Other discussions refer to the most advantageous ways Persuasion 17 to save tax, for instance, by making sure all potential work- Support 15 related expenses are claimed, as illustrated below: Other topics of interest You have to register as sole trader in order to claim Audits 14 expenses. Which is best to do if you’re reporting Penalties 16 income—otherwise you’re handing them free tax Norms of professional 35 money! group Or, as shown in the example below, finding the most Each data point represents a contribution by a forum member. As such, each contribution may refer to several themes and be coded tax-efficient business structure: simultaneously as part of multiple categories What is the optimal way to sort out my TAX? 1. Invoice to job agency for my contract jobs from my You have to register as sole trader (self-employed) so Company […] 2. Register as employee with job agent that you can claim expenses. Which you want to do— […] 3. Any other way? otherwise you’re giving away free tax money! […] When you report income on your tax return, if you’re The instances where people attempt to find ways to be not registered as self-employed you’d have to put it more tax-efficient are placed on a continuum from the most 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 937 common-place practices (e.g. making sure one claims all Manage image Finally, a number of comments refer to allowable expenses), to more complicated ways to min- managing one’s image in relation to the tax authority, imise tax liability, some of which may even be considered acknowledging that decisions that a taxpayers is or not tax avoidance, such as a number of comments about how to compliant are in many cases subjective. There is the con- cern with what one’s actions may ‘look like’ to the tax avoid paying taxes illustrate: authority. 1. I just wondered whether artists need to pay tax on work 1. Also, consider the sum of the claim versus your total they sell, if so are there good ways to avoid it (apart from not declaring income), as I know you agree we self-employment income or expenses. If it’s small, it’s likely to be more acceptable. [For instance, all my trips seem pay tax on pretty much everything. Thanks. 2. Do I still have to pay the tax on work that I’ve picked are] only 6 % of my total annual expenses. So it doesn’t seem like I’m trying to pull a fast one. up from overseas? Thinking if there is any clause whereby I can avoid paying as much tax (hope!). 2. Then, when they get back to you I would be honest with them, […]. Be as proactive as possible and you might convince them you’ve goofed and you were not deliberately avoiding them. Tax authority Tax practitioners A significant number of comments mention the tax authority. We categorised three ways that taxpayers talk It should be noted that although a significant number of about the tax authority: (1) as a source of expertise about laws and regulations; (2) as an arbiter that people can comments mention accountants and tax practitioners, many of these question the need for self-employed individuals to contact to validate their interpretation of existing rules; and employ the service of an accountant. (3) as a subjective law enforcer in relation to which they manage their image as compliant taxpayers. 1. My first year as a freelancer just ended and I made no profit. […] Do I need an accountant or will I be able to Use expertise The tax authority is talked about as a fill in the online form without one? source of knowledge about tax laws and regulations; for the 2. No, you don’t need an accountant. You’ve got it most part, people report positive experiences receiving right—sum up the total sales, subtract the expenses and expertise and guidance from the tax authority, and then the result is the profit for taxing. encourage others to seek assistance. This second comment reflects the fragility of advice in 1. […], went to the local tax office and asked them for this arena; it is not actually correct. Of those that stress the help. They were fantastically helpful. […] They helped need for an accountant, however, the primary relationship me go through any and all tax liabilities, […]. I mean, with the taxpayer is to provide guidance, both in under- it was obvious I wasn’t a tax evader or avoider—I just standing the law and in finding tax savings. didn’t have a clue. 1. BUT it is not legal accounting advice. If in doubt, get 2. I’d highly recommend going through the [tax author- some proper advice. Even a small local accountant ity] site, or calling if you need help (the sole trader might give you a consultation cheaply. people are very helpful and friendly). 2. Your accountant will advise you if you have to register for VAT, so you don’t need to worry about that. This is Arbitrate When regulations are unclear or taxpayers feel assuming that your accountant does his job properly. these can be interpreted in a number of ways, they also relate to the tax authority as an arbiter that can rule whether it regards a certain practice as compliant or noncompliant, Social network such as in the example below: Finally, a significant number of comments refer to com- 1. No, seriously, logically thinking it should be fine but munication and interaction within the taxpayer’s social the cynicism of the taxman should not be underesti- network that is relevant to tax compliance. Taxpayers share mated. I think you should write to them, make your information specific to their network, share own experi- best case, then if they don’t take it as a joke & reply in ences and advice about how to best deal with taxes, and writing to give you the go ahead you’re covered. may also try to influence other taxpayers to be compliant, 2. Oh, in that case, I would get it confirmed in writing and generally offer support to those who feel anxious. [from the tax authority] if I were you. 123 938 D. Onu, L. Oats Legal information As outlined above, most comments make in the tax compliance literature. As outlined in the refer to tax rules. However, there is an important aspect of introductory section, we are not the first to question these how rules are communicated in specific social groups, such assumptions, but we attempt to provide empirical support as the occupational group. Many taxpayers want to receive based on analysing naturally occurring data. We discuss information from those in the same occupation and to below our findings in relation to each assumption in turn. follow the practice of the occupation—this denotes a role 1. Regarding tax behaviour, people’s chief concern is not for the norms in the professional group for tax compliance. to decide whether to comply or not Although the 1. I guess I should go and talk to the tax office nearer the overwhelming majority of studies looking at tax time but I wanted to speak to other artists first and see behaviour have focused on tax compliance and the what they do. compliance decision, the main concern of taxpayers in 2. The other nurses I work with have said that transport and our dataset is to find out how to comply, to understand meals are allowable expenses and that they’ve claimed and navigate the complex legal landscape. Their chief for years successfully and have not been audited. concern is to make sure they are compliant, rather than to understand how to evade taxes. A relatively small number of cases do discuss practices that may be Best practice advice Through interacting with others, considered tax avoidance (see also ‘creative compli- taxpayers do not just learn about tax laws, but receive ance’, McBarnet 2004), the concern being to make advice from those more experienced, for example, how to sure one is compliant with legislation but significantly keep track of their expenses, how to find a suitable ac- minimises his or her liability. countant, and so on. Regarding all taxpayers as potential evaders has been 1. Get an accountant—Switch to part time, or get a night described as a bias in the tax behaviour literature job while you start things up—Don’t assume a good (Kirchler 2007). The focus on tax compliance deci- April will mean a good May, things are quite sions is also reflected by the few studies that look at tax seasonal—Mates rates don’t exist—[etc.] communication, which propose that taxpayers who talk 2. I only keep a simple cash book, and use one page for about tax exchange information about ways to evade ‘‘Money in’’ and another page for ‘‘Money out’’. tax and avoid detection (Stalans et al. 1991), about the frequency of audits and other people’s evasion behaviour (Hashimzade et al. 2013), and who has Persuasion Social networks do not only serve to transmit been audited in one’s social network (Rincke and information—some people actively try to influence others’ Traxler 2009), all of which are topics that feed directly actions, especially when compliance decisions are into compliance decisions. While we accept that involved. taxpayers may communicate about these topics, our 1. If you are not paying tax, as you previously said, then dataset suggests that their overwhelming concern is to it is only a matter of time before they get to you and make sense of the rules of tax compliance in order to recover what is owed. make sure they are compliant, rather than request 2. He needs to deal with it [sort out his tax affairs]. Once information that will help them evade without detec- the weight is lifted off his shoulders he will feel much tion or penalty. Our dataset suggests that the acquisi- better. tion of tax knowledge is more central than the compliance decision to the tax behaviour of the majority of taxpayers—a majority who are motivated Support Finally, social networks serve as support through to be compliant and not concerned with ways to evade the often stressful taxpaying process, as illustrated by the taxes. Our findings suggest that the majority of comment below. taxpayers are compliant; this conclusion echoes wider However, I really wouldn’t worry that much about it. I debates regarding business ethics. An increasing am sure that it happens a lot. I don’t know the answer number of authors suggest that the ethical behaviour but there are lots of people on here who know about this of business leaders cannot be fully understood through type of thing so one of them should be able to help. the lens of a rational actor maximising her or his own utility—this leads to an underestimation of ethical Assumptions in the Tax Compliance Literature behaviour. Instead, many business leaders are driven by ethical principles and values (e.g. Bazerman and We set out with the intention to see whether and how our Tenbrunsel 2011; Gentile 2010; Messick and Bazer- findings match the broad assumptions researchers often man 1996), although they may possess or report an 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 939 inflated sense of their own ethics (Randall and Indeed, more comments in our dataset referred to Fernandes 1991). communication with people in one’s professional 2. Compliance is not a binary variable In relation to the group or friends and family, and the involvement of compliance decision, the tax compliance literature has tax practitioners, than comments that referred to the widely regarded tax compliance as a binary variable tax authority. Although there has been some interest in with two potential outcomes: compliant and noncom- the role of tax practitioners (Gracia and Oats 2012; pliant (Kirchler and Wahl 2010; McBarnet, 2004). Hite and Hasseldine 2003; Roberts 1998; Stephenson Considering compliance as a binary decision has 2010) and taxpayer social networks (e.g. Beers et al. important advantages for its measurement; however, 2013; Hashimzade et al. 2013; Ashby and Webley compliance behaviour is in reality much more complex 2008), more research is needed to understand the role than a decision between evasion and full compliance of practitioners and of other taxpayers in taxpayer (Braithwaite 2009). As discussed above, compliance in behaviour. our dataset takes a number of forms, including finding 4. Taxpayers are seldom concerned with audit rates and ways to drastically minimise tax liability while com- penalty levels Given the classic model of tax compli- plying with the law. In this respect, our dataset echoes ance decisions based on appraisals of audit probability other authors in that compliance and noncompliance and penalty levels (Allingham and Sandmo 1972), we can take many qualitatively different forms and that would expect high concern in the online discussions studying taxpaying decisions as a binary choice with these variables. While audits and penalties may be between compliance and evasion does not reflect the of interest to taxpayers, they are usually unknown; tax complex reality of behaviour (e.g. Braithwaite 2009; authorities do not usually disclose the number of audits Kirchler and Wahl 2010). carried out, and while penalty levels are public, they Not only does compliance take many forms, tax are unknown to many taxpayers (Barham and Fox evasionisalsomuchlessclear in realitythanthe way 2011). As such, in order to estimate the likelihood of it is measured in tax experiments. Since evasion audits, people may seek information about recent audits in their social network (Hashimzade et al. 2013). relates to a person’s conscious intention to evade taxes, this personal intention is difficult to assess and If penalty levels and audit likelihoods were essential to distinguish from simple calculation error. As such, tax behaviour, we would expect people to also seek assigning to a taxpayer who has filled in a tax return information online from peers about audits and penal- the intention to evade may constitute a subjective ties. However, comments that mention audits are decision of tax inspectors (Boll 2013). This concern relatively few; of these, for the most part, audits are with the subjectivity of tax evasion judgements is mentioned as a general deterrent, with no reference to apparent in the online discussions, where people likelihood (see Table 1). comment on how to make sure honest mistakes are The largest risk if you don’t declare fully is that the not interpreted as intentional evasion by tax inspec- tax office will calculate your liability based on similar tors. businesses and issue you with the bill plus fines. It becomes apparent that research looking at compli- ance as a binary outcome (full compliance versus evasion) may lack relevance for the way that com- No comments mention people discussing having been audited pliance plays out in reality, in its many forms shaped or others’ experience of audits. Only a very small number are by the interaction of taxpayers, tax practitioners, and concerned with the cost-benefit analysis of evasion: the tax authority. We hope that future research addresses this gap by looking at the many forms of It depends on the risk you want to take! In my opinion, compliance, including tax avoidance, and also look- it’s not worth the risk if your earnings are small. ing at distinguishing between honest error and evasion intention. It is interesting to observe the term ‘risk’ used in this context. 3. The taxpayer and the tax authority are not the only While there is much debate about tax risk management in the main actors As Pickhardt and Prinz (2013) argue in context of large business taxpayers (see, for example, their review of tax compliance literature, the main Lavermicocca 2011; Mulligan and Oats 2009), there is no interaction studied in the literature concerns the private research dealing with this aspect of individual compliance. relationship between the taxpayer and the tax author- Importantly, although some people mention penalties in ity; however, other actors may be as important or even general as deterrent, only one instance discusses the actual more important for understanding tax behaviour, such penalty level, and this is a late-filing penalty. as tax practitioners or the taxpayer’s social network. 123 940 D. Onu, L. Oats 5. Alternatively, some taxpayers base their decisions on sense of existing regulations. In this sense-making process, social norms An alternative to the view that people the tax authority, tax practitioners, and the wider social comply due to existing deterrents is that people comply networks all play an important role. Second, and perhaps due to existing norms against evasion, being motivated to more interesting, taxpayers seek to negotiate compliance conform to what other people like themselves do (Onu boundaries. Many taxpayers seek to understand the various and Oats 2015a; Wenzel 2004). People may be influenced ways of being compliant and choose that which is most by a multitude of norms, such as national norms, family efficient for their business. In this process, they rely on norms, workplace norms, etc. Since we sourced data from their social network to seek out all the alternatives avail- discussion forums for particular professions, the most able to them and they rely on the tax authority to arbitrate relevant norms are those in the professional groups (e.g. whether their arrangements are in line with regulations. norms in the hairdressing industry, norms in the IT They also seek out existing norms and practices in their industry, etc.). A number of comments in the dataset refer relevant groups (e.g. profession) when deciding how to to the professional group as relevant for tax behaviour, in handle their tax affairs. Taxpayers do not only negotiate particular as a source of specialised knowledge about being compliant by the way they organise their tax affairs practice in the profession (Ashby et al. 2009). There is but also by managing their image as honest taxpayers in very little indication in our dataset that people discuss relation to the tax authority. A small number of the tax- norms in terms of approval/disapproval of evasion (i.e. payers in our dataset display noncompliant stances and injunctive norms, Cialdini and Trost 1998), but only seek approval in their social network. Further to helping norms understood as current practice in the profession taxpayers understand and negotiate tax regulations, the (i.e. descriptive norms). wider social network also performs other functions: pro- viding general best practice advice in relation to dealing Any artists who know the answer? How do you enter with tax obligations, persuading defiant taxpayers to equipment in your accounts? become compliant, and general social support. Some of the processes highlighted above have been Although we cannot tell from analysing the comments addressed by past research, such as the acquisition of tax whether discussions about current norms in the profession knowledge (e.g. Alm et al. 2010) or the role of social influence behaviour, these types of norms are most likely to norms in tax behaviour (e.g. Bobek et al. 2007; Wenzel influence people when tax rules are ambiguous (Cialdini 2004). However, other processes have received less atten- and Trost 1998). The influence of social norms in the tion. For instance, the fact that taxpayers discuss ways to profession on compliance relates more widely to organi- appear honest so that they are not considered noncompliant sational ethical behaviour, where compliance with organ- highlights the way that compliance is negotiated in the isational rules of conduct and the law is chiefly influenced relationship between the taxpayers and the tax inspector by the existence and promotion of an ethical culture in (see also Boll 2013). In addition, compliance is influenced organisations (National Business Ethics Survey 2013; see by the social network, as taxpayers seek to influence and also Parker 2000). persuade other taxpayers to comply with regulations (see also Onu and Oats 2015b). The analysis also stresses the various ways in which taxpayers negotiate compliance Conclusion based on information received from practitioners, tax authority, and the wider social network. Compliance is not Our study introduces the analysis of naturally occurring online discussions to the study of tax behaviour. We set out clear-cut and a priori defined; it is negotiated in an envi- ronment of existing norms and practices (see also Gracia to explore discussions about tax among freelancers and and Oats 2012). This conclusion is not only relevant to tax small business owners. We found that the ‘universe’ of tax compliance, but highlights more broadly that ethical busi- behaviour as reflected in these online discussions is dom- ness behaviour is not only guided by abstract regulations, inated by the need to acquire knowledge about tax laws and but it is also socially situated and negotiated between regulations, knowledge that will help taxpayers be com- various actors (e.g. regulators, advisors, wider professional, pliant, but that may also allow them to organise their tax and social network) (Donaldson and Dunfee 1994). affairs in the most efficient way. Several actors play an In addition to analysing the ‘universe’ of taxpayers’ important role—the tax authority, tax practitioners, and the concerns as they appear in spontaneous discussions, we set wider social network of the taxpayer. out to compare these findings to the focus of the tax Our analysis highlights several ways in which taxpayers relate to their tax obligations. First, taxpayers seek to make behaviour literature. Our primary finding is that most 123 Tax Talk: An Exploration of Online Discussions Among Taxpayers 941 taxpayers seem to be unconcerned with the compliance and propose that other topics may be essential to under- decision; they are motivated to comply and their main standing the experience of the majority of compliant tax- concern is to seek information about how to be compliant. payers. Such avenues include further research into people’s However, the focus of the literature on tax behaviour has acquisition and understanding of complex tax regulations, overwhelmingly been on tax compliance decisions (for a and the role of taxpayers’ social networks and their tax review, see Kirchler 2007). We do not aim to question the practitioners in this process. Also, a deeper understanding validity of research into tax compliance decisions, but of the different manifestations of compliance is desirable to rather to question whether taking a compliance decision is focusing on the dichotomy of compliance–evasion. relevant to most taxpayers. When compliance is actually The focus of research on tax behaviour has important discussed, it appears far from a straight-forward binary practical implications for informing tax authority activities. decision between full compliance and evasion. People may A research field focused on the evasion decision will advise be motivated to be compliant but may misunderstand their tax administrations to focus on audits, publicising large obligations or make errors; although they may have not had penalties, or ‘naming and shaming’ evaders, and support an the intention to evade, they discuss the subjective nature of ‘enforcement’ paradigm in dealing with taxpayers (Alm judgements made by tax inspectors regarding their inten- et al. 2010). However, the academic focus on deterring tions. People also discuss ways to minimise their tax lia- evasion will bring little contribution to all those areas of bility, including practices that could be considered tax tax administration that affect the large majority of com- avoidance. Our analysis of comments not only suggests pliant taxpayers, areas such as educating people about their that most taxpayers are concerned with being compliant, tax obligations, making sure they are confident enough to but that there are many qualitatively different forms of approach authorities, that they find it easy to comply. compliance. For the most part, the tax compliance literature Despite the fact that ‘the service approach’ is increasingly has focused on the dichotomy between compliance and at the core of tax administrations around the world, few evasion. Our analysis, however, suggests that this might be academic researchers conduct research to inform how to overly reductionist if we are to explain compliance in ‘the support compliant taxpayers (for an exception, see, for real world’, and supports calls for understanding the mul- example, Alm et al. 2010). Although our analysis has dealt tiple types of compliance (see also Boll 2013; Braithwaite with the compliance of individuals, similar analyses of 2009; Kirchler and Wahl 2010). An understanding of tax online discussions may be helpful to understand attitudes behaviour beyond the dichotomy of compliance/noncom- and opinions related to the tax compliance of large tax- pliance should be of particular interest to policy makers payers (see, for example, Christians 2012; Datt 2014). who seek to understand practices such as ‘aggressive tax It is important to note that our study relies on people’s public discussions, and it is likely that people may discuss planning’ or ‘tax avoidance’ as they are negotiated in practice (see Gracia and Oats 2012). compliance decisions to a larger extent in private settings. We also looked at whether people are concerned with This limitation is common to all other studies of tax com- finding out about audits and penalties, or social norms pliance that rely on self-report, such as those employing regarding evasion, as suggested by the compliance litera- interviews, large-scale surveys, or experiments where com- ture (see Allingham and Sandmo 1972; and Wenzel 2004, pliance behaviour is observed; given that tax evasion is often respectively). We found little evidence of people being perceived as immoral and illegal, people are reluctant to concerned with finding out about audit probabilities or admit to noncompliance to peers or to a researcher. Despite penalty levels. There was also little evidence of people this limitation, self-reports are central to tax compliance discussing their approval or disapproval (i.e. injunctive research and many seminal works in the field rely on self- norm) of tax evasion. However, some people did discuss report measures. And although there is debate regarding the what others do (descriptive norm, Bobek et al. 2007)in extent to which self-reports reflect people’s behaviour, self- relation to their tax affairs and taxpayers are even actively reports are considered to be very useful albeit imperfect encouraged to comply (see also Onu and Oats 2015b). proxies for actual compliance behaviour (for a discussion, These findings are indicative of the fact that the wider see Elffers et al. 1992). Although our study employs self- social environment can have a positive effect on business report, we use naturally occurring discussion among peers, ethical decisions (Christie et al. 2003). It is important to which often provide more accurate reflections of actual note that our conclusion does not aim to question the behaviour than self-reports given in interviews or surveys validity of previous research on the effect of deterrence because they avoid the researcher biasing responses factors on tax behaviour on those people who do indeed (Wetherell et al. 2001;Wooffitt 2005). consider evading, but to question whether many people It is also important to note that we do not aim to provide consider evasion at all. Our aim is thus to question the conclusions that are representative of all taxpayers. Our focus of research on tax behaviour on evasion decisions dataset is limited to self-employed professionals and 123 942 D. Onu, L. Oats Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: A owners of very small businesses, who carry out their theoretical analysis. Journal of Public Economics, 1, 323–338. business in the UK and who are accustomed to interacting Alm, J., Cherry, T., Jones, M., & McKee, M. (2010). Taxpayer in an online environment. Nonetheless, it is likely that the information assistance services and tax compliance behavior. content of communications about tax between these pro- Journal of Economic Psychology, 31(4), 577–586. doi:10.1016/j. joep.2010.03.018. fessionals is similar to those like them operating in other Alm, J., McClelland, G. H., & Schulze, W. D. (1999). Changing the countries, or discussing tax in other types of public fora. social norm of tax compliance by voting. Kyklos, 52(2), People who run more established businesses or those with 141–171. doi:10.1111/j.1467-6435.1999.tb01440.x. particular knowledge of tax may display different beha- Alm, J., Sanchez, I., & de Juan, A. (1995). Economic and noneconomic factors in tax compliance. Kyklos, 48(1), 3–18. viour. The forums selected in our dataset are large and Alm, J., & Torgler, B. (2011). Do ethics matter? Tax compliance and reputable online communities. It may be that in more pri- morality. Journal of Business Ethics, 101(4), 635–651. vate settings (such as face-to-face communication or online Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. communication in smaller private groups), people may be Journal of Economic Literature, 36(2), 818–860. doi:10.2307/ more likely to discuss noncompliance decisions rather than Ashby, J. S., & Webley, P. (2008). ‘But everyone else is doing it’: A seek information about how to comply, but having no closer look at the occupational taxpaying culture of one business access to such private discussions it is difficult to assess to sector. Journal of Community & Applied Social Psychology, what extent this is true. Overall, despite the limitations 18(3), 194–210. doi:10.1002/casp.919. Ashby, J. S., Webley, P., & Haslam, A. S. (2009). The role of inherent in analysing public self-report data, we believe occupational taxpaying cultures in taxpaying behaviour and that the current study is valuable in offering an in-depth attitudes. Journal of Economic Psychology, 30(2), 216–227. exploration of naturally occurring discussions. doi:10.1016/j.joep.2008.08.005. We hope other researchers will seek to analyse naturally Barham, E., & Fox, K. (2011). Compliance Perceptions Survey— Individuals 2008–2010. HM Revenue and Customs Research occurring data to investigate tax behaviour and business Report 156. Retrieved from http://www.hmrc.gov.uk/research/ ethical decisions more generally. The online environment cps-ind-report156.pdf. provides vast opportunities for collecting such data through Bazerman, M. H., & Tenbrunsel, A. E. (2011). Blind spots: Why we the use of social media sites, forums, news websites and user fail to do what’s right and what to do about it. 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Journal of Business EthicsSpringer Journals

Published: Feb 19, 2016

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