Understanding New Zealanders' attitudes to paying tax

by Nikki Mandow / 24 June, 2019
Photo/Getty Images

Photo/Getty Images

RelatedArticlesModule - Border tax psychology nz

We are pretty good about paying our taxes here, so why would we willingly go along with avoiding GST?

Hong Kong online seller UDS Mart, which is the subject of complaints to the New Zealand Customs Service, the Commerce Commission and Customs Minister Kris Faafoi, is to all intents and purposes a good Trade Me seller. Listed since August 2016, the company has sold about 4000 items on the platform and has 3690 positive ratings, 94 neutral ratings and 25 negative ratings.

But tucked in the middle of feedback such as “a good trader, prompt delivery, highly recommended” is an interesting comment from November 2018.

“Lens algud so far. What irks me is that the listing states, ‘The Buy Now price … is inclusive of all costs of applicable import tax and duty.’ Don’t want to say too much, but the declared customs value was significantly different from the actual value. The seller was not honest and probably didn’t pay the ‘applicable import tax and duty’. No matter, it is a good lens. Thanks.”

So, the buyer appears to believe UDS is rorting the tax system and is niggled by it. But in the end “No matter … Thanks.” The lens works, so the buyer doesn’t even give a negative Trade Me rating. Just a neutral face.

This is interesting, says University of Auckland economics professor Tim Hazledine. New Zealand is a country with high “tax morale”, he says, which means we tend to pay the right amount of tax, without cheating.

If you take (as some economists do) the baseline for people’s likelihood to pay tax as the chance of being caught multiplied by the fine, Kiwis pay more tax than we rationally should. It’s something to do with morality (it’s the right thing to do), reciprocity (we get something in return, such as roads, schools and hospitals) and the fact that everyone else is doing it.

Tim Hazledine. Photo/Supplied

“If tax avoidance is widespread, it’s bad for tax morale,” Hazledine says.

And because GST is so comprehensive in New Zealand and supported by double-entry bookkeeping, most people just cough up. “Most tax evasion is income tax,” he says.

The Heritage Foundation’s 2019 Index of Economic Freedom, which tracks government policies and economic conditions, shows New Zealand is one of the higher countries in terms of “tax burden as a percentage of GDP” – 32.1%. In Australia, it’s 28.2%; in the US 26%. In some developing countries, where people might feel less of their tax would reach its intended target, the number is considerably lower. It’s 10.4% in Indonesia, for example. But New Zealand’s ranking indicates we’re generally okay with paying our taxes.

So, why would an otherwise law-abiding Trade Me buyer in a country with high tax morale give a “no matter” comment and a neutral rating for a seller they reckon has cheated on GST?

Sanna Ganglmair-Wooliscroft is a senior lecturer at the University of Otago business school, specialising in, among other things, consumer psychology. She has a few ideas. The first is called attribution theory. “There is considerable research that people have a tendency to attribute negative events to external sources, while positive events are attributed to themselves. A bad test grade is the teacher’s fault, but a good grade is due to the student having studied effectively.”

In terms of tax avoidance, consumers might blame the seller, who is, after all, the expert on import regulations.

Sanna Ganglmair-Wooliscroft. Photo/Supplied

“External attribution helps us regain emotional balance. We might feel bad about not paying tax, but have an innate need to get back to our equilibrium, so we shift the blame and feel better,” says Ganglmair-Wooliscroft.

Her second theory involves the sense of satisfaction people can feel from “beating the system” – in this case the New Zealand Government. “The disadvantage to the system is rather abstract and they got a reward or benefit – a cheaper lens.”

A third possible reason is our inbuilt preference for doing nothing, particularly when making a decision is hard. “It’s not immediately obvious what to do if one should have paid GST but didn’t,” says Ganglmair-Wooliscroft. “Who would you contact? If it is complicated, we know people generally do nothing, especially if the result of the action is that they get punished and have to pay the tax.”

Finally, she says, there might be a feeling of solidarity with the group. “If I complain, not only do I have to pay tax from now on, but others will have to pay, too.”

This article was first published in the June 22, 2019 issue of the New Zealand Listener.

Latest

Writer Robert Macfarlane finds deeps truths in Underland
108287 2019-07-17 00:00:00Z Books

Writer Robert Macfarlane finds deeps truths in Und…

by Tony Murrow

In a new book, Robert Macfarlane heads underground to ponder mankind’s effect on the planet.

Read more
Why extra virgin olive oil is back on the menu for frying
108203 2019-07-17 00:00:00Z Nutrition

Why extra virgin olive oil is back on the menu for…

by Jennifer Bowden

For decades, the word in the kitchen has been that olive oil shouldn’t be used for frying, but new research could change that.

Read more
Abstract artist Gretchen Albrecht's true colours
108108 2019-07-16 00:00:00Z Profiles

Abstract artist Gretchen Albrecht's true colours

by Linda Herrick

Gretchen Albrecht paintings may be intangible, but they are triggered by real-life experience, she tells Linda Herrick.

Read more
That's a Bit Racist is playful, but it packs a punch
108435 2019-07-16 00:00:00Z Television

That's a Bit Racist is playful, but it packs a pun…

by Diana Wichtel

The taboo-busting doco is trying to change our default settings on race, but some people aren't stoked.

Read more
Are there too many tourists in NZ?
108444 2019-07-16 00:00:00Z Life in NZ

Are there too many tourists in NZ?

by North & South

Here's what's inside North and South's August 2019 issue.

Read more
Huawei's dogged determination: Can it make a breakthrough in New Zealand?
108428 2019-07-16 00:00:00Z Tech

Huawei's dogged determination: Can it make a break…

by Peter Griffin

The tech company at the centre of a trade war between the US and China is willing to go to extraordinary lengths to prove it can be trusted.

Read more
The many miracles of Aretha Franklin movie Amazing Grace
108368 2019-07-15 00:00:00Z Movies

The many miracles of Aretha Franklin movie Amazing…

by Russell Baillie

A long-lost concert movie capturing Lady Soul in her prime is heading to the New Zealand International Film Festival.

Read more
The untold history of China's one child policy
108182 2019-07-14 00:00:00Z History

The untold history of China's one child policy

by RNZ

Nanfu Wang explains the story behind her film One Child Nation, which screens at the International Film Festival this July.

Read more