Tax Morale amongst Used Car Dealers

Attitudes of used car dealers to taxation is of significance to the Australian Taxation Office (ATO) because of suspected non-compliance in the used car industry. Motorvehicle retailing was named in the ATO 2003/2004 Compliance Program as a highrisk industry in the cash economy and hence to be subject to ATO focus, including unannounced ‘walk-in’ registration visits. This paper presents a snapshot of the tax morale of a group of 18 very small businesses dealing in used cars. Tax morale (Frey 1997) is the intrinsic motivation that people have to voluntarily pay tax (Torgler 2003). The literature suggests that tax morale is partially determined by the level of trust and confidence in the tax system (Sparrow 1994; Murphy 2002) including perceptions of whether or not the system is fair (Murphy 2003; Taylor 2003). Taxpayers assess the fairness of the tax office in both relative terms, that is, the share of tax they pay compared to others (Wenzel 2004) and in procedural terms, that is, whether they are treated respectfully, impartially and responsively by the ATO (Braithwaite and Reinhart 2000). The Taxpayer’s Charter has been developed to ensure that the ATO is procedurally fair, and is seen as such (Australian Taxation Office 2003). Perceptions of relative fairness depend upon a conviction that the tax laws are fair as well as a belief that other people are not getting away with not meeting their tax obligations. In addition to tax morale, other factors affecting tax compliance are fear of the law and perceptions that the ATO has the power to enforce compliance (Braithwaite 2003). This paper does not explore these other factors but focuses on tax morale. The data presented in this paper were based on interviews with used car dealers one to three weeks after they had been subject to an Unannounced Registration Integrity Check from the ATO. In addition to providing insights about car dealer tax morale and hence compliance, this paper also presents a taxpayer perspective on the TaxPayers’ Charter