Abstract
It has been argued that authorities attract greater compliance when they treat people according to principles of interactional and procedural justice. Set in the context of taxation, the present research investigates the effects on behavioral compliance of reminder letters adopting principles of informational and interpersonal fairness compared with a standard reminder notice. Study 1 with 199 students confirmed that both fairness letters were regarded as fairer than the standard letter. In Study 2, a field experiment, 2052 Australian taxpayers who had an obligation to file a tax declaration but failed to file on time were randomly sent one of the three reminder letters. The two fairness letters yielded a significantly greater compliance rate than the control letter.
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Notes
In Australia, taxpayers who use the services of professional tax preparers need to register with that preparer and notify the tax office. All communications from the tax office are then sent to the tax preparer rather than the taxpayer.
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Acknowledgements
The data were collected as part of a research project funded by the Australian Taxation Office when the author was Fellow at the Research School of Social Sciences, Australian National University. Thanks to Tony Butterfield and John Shepherd for their support for this study. I also thank Tina Murphy for helpful comments on an earlier draft of this article.
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APPENDIX: MAIN ELEMENTS OF THE REMINDER LETTERS USED IN THE FIELD STUDY
APPENDIX: MAIN ELEMENTS OF THE REMINDER LETTERS USED IN THE FIELD STUDY
Control Letter
Your Activity Statement is Now Overdue
Our records show that you have not lodged your completed activity statement for the period: XXXX to XXXX
By now you should have completed and returned your activity statement by the due date (shown on the top right-hand corner of your activity statement) and paid any amount owing.
There are penalties for not lodging on time, and you may be liable for interest charges if you have payments outstanding. The Activity Statement Instructions booklet explains the different ways to pay any amounts due.
[It followed information about contact details, including the dot-points in the letters below.]
Informational Letter
[Same as before and then continued:]
Why are we sending you this letter?
It is our responsibility to collect tax payable under the law. Taxes fund community services and support for all Australians. We have to ensure that everyone meets their obligations under the tax laws so that those who correctly lodge their returns and pay their taxes are not disadvantaged by those who do not.
Why can’t we be more specific in this letter?
We do not know why you have not lodged your activity statement so we cannot give you more specific information in this letter. However if you:
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need to make alternative arrangements to pay any amount owing,
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lodged and paid more than five working days ago, or
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think you do not need to complete the activity statement and do not owe any amount, please call us on XXXXXXXX, and have your tax file number and activity statement handy.
Why do we impose penalties?
Without taxes, our society could not afford essential services such as roads, health and education. While most people readily comply with the tax laws, a penalty system needs to be in place for cases where a willingness to comply is missing.
[Further information about contact details followed.]
Interpersonal Letter
[Same as for control letter before and then continued:]
We believe in your honesty
We assume you try to deal honestly with your tax affairs, and understand that you may have good reasons for not lodging your activity statement. However, if you:
-
need to make alternative arrangements to pay any amount owing,
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lodged and paid more than five working days ago, or
-
think you do not need to complete the activity statement and do not owe any amount, please call us on XXXXXXXX, and have your tax file number and activity statement handy.
We acknowledge that times can be difficult
We realise that it is not always easy to fulfil your tax obligations, and there may be some reason why this is a difficult time for you. We also understand that you may have simply forgotten to complete or lodge your activity statement. However, we need to ensure that everyone meets their obligations under the tax laws, and would like to remind you that you lodge your activity statement as soon as possible.
We do not want to make things more difficult for you
There are penalties for not lodging on time, and you may be liable for interest charges if you have payments outstanding. We are sorry if penalties add to any difficulties you may already be experiencing, but we trust you will understand the need for such a penalty system.
[Further information about contact details followed.]
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Wenzel, M. A Letter from the Tax Office: Compliance Effects of Informational and Interpersonal Justice. Soc Just Res 19, 345–364 (2006). https://doi.org/10.1007/s11211-006-0011-y
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DOI: https://doi.org/10.1007/s11211-006-0011-y