Trust in tax systems is at its
highest when taxpayers perceive low levels of corruption and diversion of funds
Taxpayers’
attitudes about paying taxes correlate closely with perceived levels of
corruption, according to a major new study, Public Trust in Tax, by accountancy
bodies ACCA and the International Federation of Accountants (IFAC). A global
survey focusing on 14 developing economies, including Pakistan, found
that trust in tax systems is lower when taxpayers perceive higher levels of
corruption and diversion of public funds. The survey was backed up by a series
of roundtables to explore attitudes further.
Helen
Brand, chief executive, ACCA, says: ‘Fighting corruption is such a central priority for the global
accountancy profession because corruption has such negative implications for
trust, tax morale and sustainable development more broadly. We know from
research by the IMF that economic growth goes hand in hand with a consistent
stream of tax revenues.’
Kevin
Dancey, chief executive, IFAC, says: ‘The relationship between taxpayers and governments, and between
businesses, society and tax systems is fundamental to the sustainability – and
survival – of the economies that support us all, in both the short and long
term. Our Trust in Tax surveys provide crucial insight into these relationships
and can help global policymakers as they consider the best way forward.’
IFAC recently
released its Action Plan for Fighting Corruption and Economic Crime, with broad
support from the global accountancy profession. The plan outlines specific
actions that members of the profession can take, individually and in concert,
to engage in a meaningful way in the fight against corruption. ‘Given the
correlation between perceived levels of corruption and citizens’ willingness to
pay taxes, this plan is an important effort to help ensure that citizens see
the benefits of their tax dollars,’ says Mr. Dancey.
Assad
Hameed Khan, head of ACCA Pakistan, says: “Broadening the tax base is key to
achieving Pakistan’s inclusive and sustainable economic development. A
significant shift and step change is required towards documentation of the
economy, increased regulatory capacity and use of technology (data analytics).
Contribution of the accountancy profession is critical to these focus areas,
requiring concerted efforts by all stakeholders to bridge the gap between
demand and supply of professionals.”
Key
results
The survey's key
findings are set out below:
Trust
and corruption
Politicians are
widely distrusted with a net trust deficit of -25%. In contrast professional
tax accountants and lawyers are trusted (67.1% and 64.6% respectively).
Attitudes to tax authorities are split with a significant minority – 27.9% –
distrusting or highly distrusting them.
Roundtable
participants saw lack of trust in politicians as a major barrier to tax
engagement with the systems. Citizens don’t object to paying tax – they object
to misappropriation.
Tax
minimisation
In the survey
46.4% agreed that multinationals were paying a reasonable amount of tax. This
contrasts with Public Trust in Tax surveys in G20 countries showing only 22.4%
agreed.
Attitudes towards
tax minimisation are more relaxed in developing countries with respondents more
likely to agree that specific taxpayer groups were paying a reasonable amount
of tax.
Incentives
People strongly
support the use of tax incentives to target megatrends such as climate change
(73.8%) and ageing population (72.8%).
Tax incentives
were seen as a way of attracting multinational businesses to invest (73.9%) and
build a more coherent international tax system through co-operation between
countries (69.3%).
Author
of the report Jason Piper says: ‘An efficient, effective and trusted tax administration is one
building block in the sound structure of society. This survey shows that the
problem lies not with the collecting of tax but what happens afterward. A lack
of accountability in government spending fosters the perception – and all too
often the reality – of corruption in government.’
Since 2017 ACCA
and IFAC have been gathering data across the G20 on attitudes and opinions of
the general public. The latest survey is the first to look beyond the G20 and
comes at a crucial time for economies across the globe, given uncertainty
following Russia’s invasion of Ukraine and the Covid-19 pandemic.
This year’s survey
builds on previous research, and for the first time includes data from
developing countries outside of the G20. With the UN predicting that the
highest population growth up to 2050 is set to happen in non-G20 countries,
this edition of Public Trust in Tax looks at issues impacting an increasing
share of the global population.
This study is
based on an online survey of 5,958 individuals from the following countries: Angola,
Colombia, Cote D’Ivoire, Dominican Republic, Egypt, Guatemala, Kazakhstan, Kenya,
Malaysia, Nigeria, Pakistan, Peru, Philippines, and Vietnam. The countries
surveyed were selected based on a range of economic, political, geographic and
cultural factors.
Read Public Trust
in Tax: Global Perspectives 2022: https://www.accaglobal.com/gb/en/professional-insights/global-economics/public-trust-tax-2022.html