An investigation of the factors which influence and deter the compliance behaviour of Australian individual taxpayers

The tax compliance literature indicates that many factors, including economic, social, psychological and demographic factors, have an impact on the compliance behaviour of taxpayers. Of the two main compliance theories, the economic deterrence theory model and social/fiscal psychology theory model, this study has adopted the latter. The aim of this study was to examine whether or not a relationship exists between selected tax compliance variables (both economic and non-economic) and the attitudes and behaviour of Australian individual taxpayers, with an emphasis on which variables also act as an effective deterrent to non-compliance. This study adopted a mixed method research approach. First, a quantitative component comprising a mail survey was distributed to a sample of known tax evaders (i.e., those who had been audited and penalised) via the databases of the ATO. This was followed by an electronic version of the survey which was distributed to a sample of the general population (non-evaders) via the databases of a market research company. Second, a qualitative component comprising six tax evader and seven non-evader semi-structured interviews were conducted over the phone and in person to support and cross-validate the previous survey findings. The variables of interest in this study were the moral values of taxpayers, their perceptions of fairness and specific deterrent measures. Eight demographic variables were also examined in conjunction with the compliance variables. The survey data was statistically analysed using Chi-Square and Logistic Regression and, for a comparative analysis between the two different samples, Mann-Whitney U Tests were employed. For the interview data, thematic framework analysis was utilised along with the pattern-matching technique. Based on both components of the research method, there was evidence of a significant relationship between tax morals, tax fairness and tax law enforcement and compliance behaviour in the evader sample. With respect to the non-evader sample, there was a significant relationship reported between tax penalties, tax morals and tax awareness and compliance behaviour. No significant results were reported for the probability of detection and compliance behaviour in either sample. However, there was some evidence of a relationship between the selected compliance variables themselves, for example, tax fairness and tax morals. Other major findings included the influence of the gender variable on selected compliance variables for both the evader and non-evader samples, while both the income and education variables significantly impacted upon compliance behaviour but mainly in the evader sample. The results of all other demographic variables were not significant. In distinguishing between the two taxpayer samples, all compliance variables except tax morals and tax penalties produced statistically significant differences. Likewise, amongst the eight demographic variables, statistically significant differences were reported for six, with only location and return lodgement being similar amongst the samples. Consequently, the findings of the study suggest that tax morals and, to a lesser degree, tax fairness, tax law enforcement, tax awareness, gender, education and income level, directly and indirectly influence compliance behaviour. It is envisaged that the results of this study provide useful information for the Australian revenue authority and have implications for tax policy development.