Tax morality : assessing the legality of tax avoidance against its morals

Abstract

Purpose - This research study is aimed at evaluating whether the overriding principle in governing unacceptable tax avoidance practices should effectively be the subjective notion of morality. Design - The research objectives were attained through the undertaking of semi-structured interviews with eight respondents, varying from Members of Parliament; the Revenue authorities and a number of established accountancy firms in Malta. Findings - This study stressed the importance of tax competition and subsequently, the countries autonomy over the respective tax systems. Moreover, the interviewees also brought to light the prevailing culture of evasion in Malta which is thought to surpass unacceptable tax minimization practices. The study also sets forth the lack of awareness by the local general public in respect of the international tax avoidance and morality debate and that many times, the locals construe avoidance practices for evasion. Lastly, the research also affirmed the fact that there is a morality side to taxation, which does not rest solely with the tax payers but also with the government and policy makers. Conclusion - Notwithstanding the fact that morality is understood to play a role in taxation, it has been concluded that morality is a subjective notion which should not be applied to an objective principle. Hence, policy makers should ensure that taxes are reasonable and that the laws governing income taxation are clear and simple in order to regulate tax minimization practices and ascertain compliance. Value - Taxes are crucial in sustaining the country and its economy. This study not only recommends increased education about the importance of tax contributions but also a simplification of the existing tax legislation, in order to clearly establish what is acceptable and what is not and circumvent the morality debate.