An analysis of taxation literacy in Malta

Abstract

Purpose: To measure the level of taxation literacy of the Maltese population, to identify differences in taxation literacy among different sectors of the population, to evaluate whether people want and are willing to attend educational sessions on taxation and to assess whether different levels of taxation literacy change the perception of the fairness of the taxation system. Design: Quantitative research was used in this study. A self-completion questionnaire was prepared and shared through the internet and delivered by hand, which was answered by 1,062 Maltese resident and domiciled individuals who are 18 years or older. Statistical tests and analysis were then used to analyse the results from the questionnaire. Findings: This study shows that the level of taxation literacy in Malta is worryingly low. Taxation education has a significantly large effect on taxation literacy, and currently the number of people who have any taxation education is particularly low. The study also shows that there is remarkable support for an increase in taxation education, both in the formal and non-formal educational system. Lastly, the study confirms that an increase in taxation literacy improves the perception of fairness of the taxation system. Conclusions: The study concludes that taxation education should be increased in both the formal educational system for upcoming generations and also informal educational system for those who are not in the formal educational system anymore. Taxation education should be done through various different channels due to the differing requirements and preferences of various people. Advantages of taxation literacy should also be highlighted to increase the motivation for the population to educate itself. Value: Taxation is a significant financial burden for the public and literacy about the subject should be commensurate to its burden. Benefits of taxation literacy to taxpayers include less penalties incurred through better compliance, better use of taxation mechanisms which reduce the taxation burden and an increased feeling of empowerment. Benefits of higher taxation literacy to the government include a decrease in compliance costs, higher and more timely taxation revenue through increased compliance, and a better attitude to taxation from the taxpayers.