The introduction of a broad-based consumption tax in the form of a value added tax (VAT) in the United Kingdom (UK) and goods and services tax (GST) in New Zealand and Australia was politically challenging at the time. This article provides the rationale for their introduction and the process of that introduction in different political contexts. It discusses whether there are lessons that can be drawn as to the political indicators that may need to be present for implementation of significant tax reform, with particular reference to GST reform in Australia.

The purpose of this paper is to review and evaluate the work of the UK Behavioural Insights Team (BIT) in the light of the growing literature on behavioural economics. The Team was established in 2010 in the Cabinet Office at the centre of government in the UK. The BIT was specifically set up with the aim of helping the government develop and apply lessons from behavioural economics and behavioural science to public policy. A direct link with the behavioural literature took place when the book Nudge by Richard Thaler and Cass Sunstein (2008) became ‘required reading’ on a 2008 summer reading list for Conservative Members of Parliament since their views are seemingly consistent with the Conservative Party’s tax and welfare policies. For this reason the Behavioural Insights Team is often known as the ‘Nudge Unit’. At the time of writing (May 2014) it has been announced that the unit will be moved outside government to continue its work, though government (and others) can continue to use its services. This paper analyses a series of reports published by the BIT and concludes that those on health policy, organ donation and charitable giving used behavioural insights to a considerable extent while two of the reports on financial aspects did so to a lesser extent and another one on financial matters hardly at all. It is suggested that some areas may have more potential than others for the application of behavioural insights but that such potential also exists with respect to financial behaviour.

One of the key areas where behavioral economics offers major insights into developing successful policy
involves issues of fairness. Taxation offers many examples, ranging from the Boston Tea Party of 1773 to the
UK’s unsuccessful community charge, often called the ‘poll tax’, of the early 1990s, where a failure to appreciate fully taxpayers’ perceptions of fairness led to unexpected outcomes. The use of behavioral economics
to supplement mainstream economic analysis might not only reduce the risks of such tax disasters but also
improve the development of tax reform more generally. This paper shows how such additional explanatory
power contributes to our understanding of the success or failure of UK tax policy arising from the ‘natural
experiments’ of the successful introduction of value added tax in 1973 and the contrasting difficulties associated
with the community charge in 1990 and, more recently, the abolition of the 10% rate of income tax in 2008.

The Henry Report on the future of the Australian tax system examined many areas of relevance
to tax systems in general. One was the tax treatment of employment expenses. The
Henry Report recommended that a new test should be introduced to narrow the definition
of deductible employment expenses and that this test might be similar to the approach
taken in the UK. In the light of the basic principles of the issue, this paper examines the
reasons for the recommendation and the extensive experience of the UK arrangements.
The situation in New Zealand is also examined as another approach. Finally a possible solution
is suggested.

Tax Administration is a risky business. When taxes are not well administered, tax morale may be undermined and unnecessary administrative and compliance costs incurred. Mainstream economics and the self-interested rational choice model provide a powerful contribution to understanding the effects of taxation but that analysis has not always been enough to avoid serious and expensive difficulties. Behavioural economics has been making an increasing contribution to understanding how tax administration may be improved. Some of the assumptions of mainstream economics have been subject to close scrutiny and DellaVigna (2009) summarized deviations from the standard model as non-standard preferences, non-standard beliefs and non-standard decision-making. In recent years considerable analysis and evidence have been presented on the importance of aspects such as fairness in taxation, the endowment effect, framing of decisions, limited attention, loss aversion and mental accounting and their impact on the operation of a tax system. A risk management approach to tax administration has been developed by the European Commission, the OECD and others. One area that has received less attention than may be appropriate is the performance of tax agencies themselves. This paper therefore outlines the contribution behavioural economics can make to existing approaches in reducing the risks of tax administration and extends it to the performance of tax authorities themselves.

This paper examines the contribution of behavioral economics to understanding the gap between theory and practice in tax reform by examining two major reforms in the United Kingdom which may be seen as natural experiments – the reform of local taxation and the introduction of value added tax. The case for both was based strongly on mainstream economic analysis but one was a failure and the other a success. The introduction of the local community charge, or ‘poll tax’ as it became known, was such a failure that not only did it have to be repealed but it was also a factor in the downfall of Mrs. Margaret Thatcher as Prime Minister. The introduction of value added tax took more account of behavioral factors and was successful. The paper concludes that a wider approach based on behavioral as well as mainstream economics may have considerable advantages in developing tax policy.

Although it is believed that university research benefits teaching, it is unclear whether the research has to be ‘excellent’ in order to have such beneficial effects. In the UK, the Research Assessment Exercise (RAE) and the work of the government Quality Assurance Agency (QAA) generated an enormous amount of relevant information regarding the assessment of university research and teaching. As these exercises overlapped in 2000/2001 they also presented a ‘natural experiment’ by which the two could be linked. This paper reviews the two exercises and then analyses the results for departments of Business and Management and departments of Economics as a comparison. On the basis of the evidence, it does not seem that research that is classified by the RAE as internationally ‘excellent’ has a large and measurable benefit on teaching quality in addition to such benefits generated by research more generally.

This paper extends previous work presented at the SABE/IAREP conference at St Mary’s University, Halifax (James, 2009). In the earlier paper it was shown that conventional economic theory is used to make the case for tax reform but does not always adequately incorporate all the relevant factors. However, an approach based on behavioral economics can make the difference between success and failure. In this paper the contributions of other social sciences are also included. Taxation is a particularly appropriate subject to explore the integration of the social sciences since they have all devoted considerable attention to it. It can be seen that different social sciences suggest a range of variables that might be taken into account in addition to those included in mainstream economics. Other social sciences also offer different methodological approaches and consider the possibility of different outcomes of the fiscal process. The paper concludes that it is not easy to integrate the social sciences in a single approach to the study of tax and tax policy. There may also be the risk of encouraging inappropriate integration - researchers operating outside their expertise can produce results that are not helpful. However, comparing the contribution of behavioral economics with those of the social sciences more generally, it can be seen that behavioral economics can offer a framework within which these areas can be examined. Indeed, it may be a useful channel to add the contributions of other social sciences to mainstream economic research.

Abstract: This paper examines issues affecting the formulation of tax policy through to the development of actual proposals by tax policy-makers. This is done taking account of the possibility that too narrow an approach to this process can produce misleading conclusions and that proposals for tax reform may be inappropriate when the wider context of the tax system as a whole and the environment in which it has to operate are considered. Two issues are used to illustrate this situation – tax compliance and tax simplification. The paper concludes that in developing tax policy it is important to ensure that the wider context is taken into account and it also outlines a practical approach to achieve this aim.

Abstract

Tax reform provides many examples of failures - where reforms did not achieve their objectives successfully and sometimes even had to be reversed. However, value added tax (VAT) in the UK and goods and services tax (GST) in New Zealand have survived successfully for many years. This paper describes the nature and brief history of VAT and GST and then assesses the factors that contributed to their success. A key factor is the process of implementation both in allowing effective prior consultation to identify possible problems and improvements as well as preparing the taxpaying public for change. It is also important that the reform was seen to be fair, that there were gains as well as losses and the change was a net improvement. In assessing how the arguments for the introduction of VAT/GST turned out in practice, it is clear that this is a robust form of taxation and has been well able to accommodate the different political pressures in the UK and New Zealand.

There are many examples of reforms to personal income tax in different countries that do not appear to have achieved the success expected of them but have led to unexpected and undesirable outcomes. A possible reason is the ad hoc nature of many reforms made primarily in response to particular circumstances but possibly with insufficient regard to other important matters. These matters include likely economic, political and social effects, the increasing importance of international considerations, administrative constraints and the extent to which the changes are consistent with other aims and objectives of tax systems and government policy more generally.

This paper examines the nature of personal income tax reform analysing relevant examples and presenting an Australian/UK comparison. There seems to be considerable scope for improvement in the way income tax systems are reformed. The paper then turns to the nature of a more strategic approach and the advantages it might have for income tax reform in the longer term. The main themes are the ways in which such an approach should take account of the wider context and the necessity of mechanisms to ensure that tax systems continue to achieve their intended purposes in changing circumstances.

The processes involved in the development of robust tax strategies are not always simple or easy but are necessary if tax reform is to be achieved without excessive economic, political and social damage.

This study compared the attitudes toward online shopping of British and American individuals. Using a sample of327 British and American university students, the British respondents were found to be to have less favorable attidues toward online shopping. Attitudes toward online shopping were found to be significant predictors of making online purchases. The implications of these results were duscussed and suggestions made for future research

Short scales to measure affective, cognitive and behavioural attitudes toward credit cards developed from a longer scale and were administered to respondents in Great Britain and the United States and were found to be highly reliable and valid

The importance of behavioural economics in supplementing and extending the neoclassical analysis of taxpayer behaviour has been recognised for some time. This paper summarises contributions to date and outlines a way forward for integrating the behavioural and neoclassical approaches and developing a more coherent strategy of encouraging taxpayer compliance. The paper then provides significant further evidence relating to taxpayer behaviour by reporting some of the main results of two substantial surveys (N = 2,040 and 2,374) of Australian citizens’ beliefs, attitudes, values and motivations with respect to the tax system, widely defined. It is concluded that the behaviour of Australian taxpayers’ is not determined only by considerations of narrow economic rationality based on the expected financial costs and benefits of compliance or non-compliance but is also influenced by a much wider range of factors. Examination of the importance of these other factors might be the most fruitful way of improving tax compliance in the future.

The issue of multi-level taxation is currently highly relevant to two issues – European tax harmonisation and local government taxation in the UK. This paper presents a general economic analysis of multi-level government and taxation and the characteristics that might make a particular tax appropriate as a regional or local tax. In applying this analysis to European tax harmonisation it is clear that there is little harmony in the meaning of the term and a classification is presented. The experience of local government finance in the UK is that equity has been the most difficult criterion to meet. So far the main driving force for EU tax harmonisation has been efficiency in the form of free trade in order to achieve the establishment and functioning of the European internal market. It is therefore suggested that a greater emphasis be placed on equity as an economic criteria in developing European tax harmonisation. Applying the analysis specifically to local government in the UK it is clear that taxes on property meet most of the criteria relating both to taxes in general and to suitable lower level taxes. However it has been the issue of equity that caused the demise of local authority domestic rates and the community charge in turn and continues to raise difficulties with the present council tax. It is therefore suggested that coverage of the income tax feature of council tax – council tax rebates – be extended.

This paper updates and extends an earlier analysis (James, 1999) of factors influencing the shape of the international tax system. This was done using the strategic management technique of STEP analysis: a technique that has subsequently been reformulated as a PESTEL analysis. Since the original work was undertaken in 1998 there have been many further contributions to our understanding of the issues involved. This paper examines methods of analysing the tax development process, and the pressures affecting it – dealing in turn with Political, Economic, Social, Technical, Environmental and Legal factors. It is concluded that a blending of national and international tax policies is the most appropriate way to deal with the implications of globalisation, with national policies requiring increased modification to take account of changing international conditions.

The Australian Taxpayers’ Charter was introduced in 1997 and a revised version in November 2003. This is therefore an appropriate time to review the contribution of this initiative. This paper traces the development of such modern charters and then specifically the development of tax charters. The Australian Taxpayers’ Charter and the Australian Tax Office’s (ATO) experience with it are then examined. Among other possible advantages, the Charter may be used as a measure of the ATO’s performance. Taxpayers’ views regarding the extent to which the ATO meets its obligations under the Taxpayers’ Charter as expressed in two surveys of Australian voters (N = 2,040 and 2,374) are presented. Generally the taxpayers are supportive. The results of the survey also support the ATO view that the Charter fits in with compliance policy. Finally, the Charter demonstrates how initiatives in tax administration might be successfully achieved.