Survey finds widespread ignorance about taxby
Deloitte commissioned a considerable survey on tax knowledge and has used it to call for more tax education. It also found that tax knowledge correlates with a perception of fairness and a willingness to see taxes rise.
The Deloitte survey used questions on whether you have a personal tax account and whether you file a self assessment tax return to gauge a level of interaction with the tax system.
The body of the survey included a series of questions resulting in a Tax Education Score (TES) score, ie how many of the questions the participants got right out of 30. Wrong and "don't know" answers both scored zero. I recommend you look at the factual tax questions in Annex B2 on page 25. No, I'm not going to tell you what I scored.
Finally, there were questions related to attitudes to tax such as:
- Is the system fair?
- Should taxes be increased?
- Would you be prepared to pay more tax in return for better government services?
What do the results tell us?
The authors of the Deloitte paper did some clever econometric analysis (there are pages of formulae and terms like Poisson, Negative Binomial, Ordered Probit and Ordered Logistic models are used). Fortunately, you don't have to wrestle your brain around the modelling to understand the conclusions, which are:
- Older, richer, or more educated people tend to know more about tax than younger, poorer or less educated people
- The more you understand about how the tax system works, the fairer you are likely to perceive the tax system to be
- The more you know about tax, the more willing you are likely to be to see taxes rise, except;
- Results are slightly lower if the question is re-phrased to ask how much more willing you are to pay more tax yourself.
None of this is counterintuitive, although there is a fair amount of surprise expressed in the report that the TES scores are so low, and that engagement with the system is so low. For example, although a fifth of participants submit self assessment tax returns, half of those being self employed or landlords, 14% filed an SA return but didn't know why.
Most of us would nevertheless find the results unsurprising. For example, young people know less about tax than older people because they have had less experience in dealing with it.
When to engage
To me, it is promising, that people knew when they needed to engage with tax, and most people knew whether; Airbnb, Instagram influencing, lottery winnings and eBay trading, were taxable or not.
The report rather judgmentally states that people performed “comparatively poorly” on tax knowledge questions. But why should people remember what "1250L" means and what is the top rate of tax?
If the participants knew when they needed to engage with HMRC, I would argue that they don't need to remember what HMRC should know – ie what PAYE codes represent and the top rate of tax. That information can be googled if necessary.
With regard to the recommendation to improve tax education, I believe it requires further exploration. In the abstract of Deloitte's paper, it says "Tax affairs aren’t covered in state school education". However, "citizenship" is a foundation subject at Key Stage 4, where school students are working towards GCSEs, and that must be an obvious place to include some tax education.
Indeed, the current national curriculum specifies that GCSE students must be taught about "income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent." This has been the case for five or six years.
Maybe the real question is: what tax education actually exists in schools, and how could it be made better?