At the recent launch of Kate Bell & Declan Gaffney’s report on the ‘nothing for something’ benefits system, Richard Exell of the TUC asked if people had become more sympathetic to tax-dodging at the same time as they’ve become more hostile to people on benefits? In an unlikely attempt to impersonate a 21st-century academic, I managed to carve out the stats and send them to the chair of the launch while watching the rest of the webinar – but aside from the surprise that my multitasking skills were up to this (usually they’re not…), I thought it was interesting to share the figures on the blog, particularly given the storm over a Treasury Minister describing cash-in-hand payments to avoid tax as ‘morally wrong’.
So have we actually become softer on tax-dodgers – at least before the tax-dodging furores during the latest recession?
When dodging tax is wrong
The starting point for any discussion about tax attitudes is: on a very general level, people believe that they have a moral duty to pay taxes. To look at attitudes to taxation, I’ve dug out the relevant questions from the British Social Attitudes survey, which is generally seen as the gold standard for looking at attitude trends since its birth in 1983.
The most recent question (from 2004) asked whether for being a ‘good citizen’, ‘How important is it never to try to evade taxes?’ On a 7-point scale where 1 is ‘not at all important’ and 7 is ‘very important’, 64% gave a ’7′ and 88% of people at least reported a ’5′. There’s also no sign that that this has gone down over the 1990s according to whether people feel it is wrong to not report all of your income in order to pay less tax (see the figure below).
Likewise over the 1980s, three-quarters thought that people ‘should not be allowed to get away’ with avoiding their full income tax (rather than ‘good luck to them if they can get away with it’) – and this changed little 1983-1989. (If anything, people were MORE likely to say this shouldn’t be allowed).
When dodging taxes is excused
While tax dodging in general is seen as morally wrong, people excuse what are seen as ‘milder’ forms of tax-dodging. There are two forms of this that the British Social Attitudes survey covers.
Firstly, people think that being paid in cash to avoid income tax is slightly excusable. In 2006, 54% thought this was ‘wrong’ or ‘seriously wrong’, while 46% thought it was ‘not wrong’ or only ‘a bit wrong’. So more people are against it than are for it (and only 12% said it was ‘not wrong’ at all), but clearly attitudes are more split than in the case of general tax-dodging above.
Secondly, people think that paying someone in cash to avoid paying VAT (sales tax) is even more excusable. The latest question was in 2000 and asked about paying a plumber in cash to avoid VAT: 40% said this was ‘wrong’, ‘seriously wrong’ or ‘very seriously wrong’ (note the wording change from the last question), while 60% said there was ‘nothing wrong’ or ‘only a bit wrong’.
Often these questions are asked in slightly different versions, but in 1987 they were asked in the most similar versions:
- For the question, “A local plumber does some of his business for cash and does not declare it for tax. Over a period he avoids paying £500 to the Inland Revenue. What do you think … nothing wrong OR very seriously wrong?“, 78% thought this was ‘wrong’, ‘seriously wrong’ or ‘very seriously wrong’.
- For the question, “A householder is having a repair job done by a local plumber. He is told that if he pays cash, he will not be charged VAT. So he pays cash. What do you think … nothing wrong OR very seriously wrong?”, 44% thought this was ’wrong’, ‘seriously wrong’ or ‘very seriously wrong’.
In other words, taking significant steps to avoid taxes is seen as very wrong – but not informing the tax authorities about extra work is seen as not quite as wrong, and dodging VAT is (on average) not really seen as wrong at all [You can see something similar in Pattie et al's report (p48/9)].
Moreover, while only 36% of people said they be ‘very likely’ or ‘fairly likely’ to avoid telling the taxman about £500 of cash-in-hand earnings (in 1999), as many as 73% said they’d pay a plumber in cash to avoid being charged VAT – a point I return to below.
Trends over time
So has there been any change in attitudes to taking advantage of cash-in-hand payments to avoid tax? The chart below shows the results – and basically there’s been little change to attitudes or actions around paying cash to a plumber to avoid VAT. For not declaring income tax there’s been a little more movement, but this is in contradictory directions: the view that this is wrong peaked in 2002, but was little different in 2006 than 1996. People’s stated likelihood of doing this, though, went down consistently (from 41% in 1996 to 36% in 2006 saying they were ‘very likely’ of ‘fairly likely’ to not declare £500 of cash-in-hand work).
It’s interesting to see how attitudes to tax dodging don’t seem to have shifted, while attitudes to benefit claimants and particularly benefit fraud have changed substantially (as we’ve previously catalogued on the blog – see here and here). This confirms what we already knew from Charlotte’s fascinating post - ‘attitudes to inequality and poverty’ are multifaceted, and some parts of these attitudes can become more progressive while other parts stay unchanged.
Finally, despite the unpopularity of wealthy tax dodgers at the moment, ‘milder’ tax dodging is excused by sizeable proportions of the British populations – andit’s therefore hardly surprising that there was a media storm after Treasury Minister David Gauke claimed that such practices were ‘morally wrong’…