Labor wants ATO to appeal to taxpayers' sense of fairness

| 13.11,18. 02:23 AM |

Labor wants ATO to appeal to taxpayers' sense of fairness

Photo: Labor wants to see government agency spending evaluated more closely. (ABC)

Shadow Treasurer Andrew Leigh has announced that Labor, if elected, would set up a new office of the evaluator general, based within Treasury, that would work with other departments including the Australian Taxation Office (ATO) to ensure taxpayer money was being spent as it should — and yielding results.

It would also encourage departments, including the ATO, to carry out more random trials, such as those conducted by overseas tax administrators that aim to appeal to peoples' sense of fairness to get them to pay more tax.

Dr Leigh pointed to a trial by the Norwegian Tax Administration involving more than 15,000 taxpayers, which had yielded positive results, saying similar trials could be carried out in Australia.

The Norwegian experiment

The Norwegian trial, carried out in 2012, and the results — which were published in the Harvard Business Review last year — showed people respond to moral appeals.

Taxpayers were randomly assigned to either a control group that did not receive any letter or to treatment groups that received some letter from the tax administration just before they were to self-report their foreign income.

Some taxpayers got a "base letter" that only contained information about why and how to report foreign income.

Others received a "moral letter" — reminding them how most taxpayers report their Norwegian incomes correctly and that tax revenues finance important public goods — or a "detection letter" — one that did not include any moral appeal, but did warn they might be audited.

The base letter itself increased self-reported foreign income. But, more importantly, the average amount of self-reported foreign income by the taxpayers who received one of the moral letters was almost double the amount self-reported by those who received the base letter.

Australians respond to 'nudges'

The Australian National University (ANU), in collaboration with the ATO, also recently undertook trials similar to the one in Norway, but instead sent reminder letters about outstanding tax debts.

A total of 4,787 unpaid debt cases were randomly allocated to receive a reminder letter either one, two or three weeks following their missed tax debt due date; and a control group of about the same size did not receive a letter for the seven-week duration of the trial.

The results? Receipt of a reminder letter increased the probability of payment for debts up to about $7,500 (there was no discernible effect for debts above $7,500).

At the same time, the ATO started using pop-up messages when people self-lodge their tax returns in myTax to let them know, in real-time, if their work-related expense claims appear out of step with their peers.

In the past financial year about 230,000 taxpayers got the nudge to review specific items and this alone resulted in the agency collecting $24 million in extra revenue.

Tax Commissioner Chris Jordan told Senate estimates last month its education campaign to stop people incorrectly claiming work-related expenses had positively affected returns lodged so far.

   "Interestingly, we are this year starting to see a decline in the overall value, and I think, for the last 20 years, each year the value of work-related expenses has gone up," Mr Jordan said.

'Evaluator general' would get $5m a year

Dr Leigh said he wanted to see more randomised trials take place in Australia, and that they "don't have to be expensive or time-consuming".

Last year, the House of Representatives Standing Committee on Tax called for the ATO to make greater use of behavioural insights techniques, such as randomised controlled trials.

   "Many of the world's most successful companies use randomised trials to boost productivity," Dr Leigh said.

He added that, if elected, Labor would better evaluate government programs by creating an evaluator general, based within Treasury.

The office would be funded with $5 million per year, starting in 2019-20, and its mandate would be to work with departments across the Federal Government to conduct high-quality evaluations of their programs, including randomised trials.


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