Tax evasion in Malta : an ethical analysis of the perception of the Maltese people

Abstract

PURPOSE: Tax evasion is a worldwide problem which has a negative impact on the community, therefore it is important that authorities do their utmost to try to minimise it as much as possible. In this regard, understanding what the general public thinks about tax evasion would be beneficial. This study is aimed at assessing the perceptions and attitudes of the tax authorities as well as that of a representative sample of the Maltese population. Moreover, it explores the levels within Kohlberg’s Cognitive Moral Development theory with regards to the Maltese population, together with identifying whether there are any links between the levels of ethics with respect to tax evasion and the gender, education and age of respondents. DESIGN: The objectives of this study were achieved by distributing questionnaires to the general public, as well as conducting an interview with a representative from the Inland Revenue Department. Such primary research was compared and contrasted with secondary research. FINDINGS: This study shows that although the general public perceives tax evasion as a wrongful act and is considered as a civil disobedience, when presented with possible real life scenarios, some respondents still selected that they would evade tax. Tax evasion was seen as being less serious than a number of other crimes. In addition to this, the majority of the general public tends to reason at stage 4 (the conventional level) of Kohlberg’s Cognitive Moral Development theory; which shows that importance is given to what is expected of them by society. This study also shows that gender does not have an impact on the decisions made by respondents, whereas a relationship could not be extracted for the educational level and age due to a lack of consistency in the results. CONCLUSION: As it was found that the majority of individuals give importance to society rather than personal gain when making ethical decisions, tax education on the importance of taxation and charging tax rates which are seen as fair are likely to have far reaching benefits in the fight against tax evasion. VALUE: This study may help guide the tax authorities to efficiently reduce the level of tax evasion in Malta. Trust must be built between the authorities and the taxpayers in order to formulate a situation which is fair and beneficial for both.