Developing an understanding of taxpayer perceptions in an economic crisis

This paper sets out to examine the impact of fiscal policy changes in a time of severe pressure on government budgets and considers the role of the perception of taxation upon government policy formulation. The paper discusses how perceptions of taxation and the acceptability of tax changes are integral to tax policy formulation. It shows that changes in tax regulations and their implementation gives rise to two distinct outcomes. One in which government policy formulation, at least at the moral and practical level of policy formulation, is seen to be equitable fair and acceptable. This is because the proposed tax changes have an adequate cushion to mitigate what is perceived as the excess burden on individual and families at the margins of the society; the other in which tax revenue increases are conditional on the level of ‘avoidance’ and ‘evasion’. The paper examines the potential effects on the behaviour of citizens of an increased burden of tax on the one hand, and on the other, its impact on the increase in tax revenue. It transpired that the effect of tax changes depends critically on the economic cycle, time lags in implementing tax changes, confidence of people in politicians to adapt a balance approach that is equitable and fair in that it is seen as progressive rather than regressive in its effect. The research findings, while exploratory, have interesting implications for policy formulation and suggest further research is required to study the adjustment in taxpayer behaviour resulting from policy changes and the processes which bring together perceptions and reality.