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Survey finds widespread ignorance about tax

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.

11th Oct 2019
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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.

Quelle surprise?

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.

Education hole

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?

Replies (8)

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Hallerud at Easter
By DJKL
12th Oct 2019 00:15

Often thought schools ought to have some basic financial/tax instruction, covering not only tax but also life insurance, pensions, cost of credit card /similar debt etc. The catch is large numbers of school leavers will have little real life exposure for the next 3-4 more years (though may slightly with holiday jobs) so by the time some of it is relevant it will be forgotten.

I am in Scotland but on talking to my other half ,who works in a school, there really is little provision and the teachers themselves are certainly not equipped to offer such guidance.

Have often thought schools should have much broader use into the evenings and with their use by the wider community (evening classes etc) , and with their not just being for those up to say age 18, they could possibly tap into a bit of retired accountancy talent to offer some of the life skills re say finance.

Having said the above I cannot see these sorts of things, offered by volunteers, being compulsory.
If I were say to go into my wife's school (and you do have all the child protection issues/disclosure checks to deal with first) to offer a quasi lesson on basic tax and NI I doubt I would be returning if I faced "difficult behaviour" from those not actually wanting to be there.

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By Rgab1947
14th Oct 2019 12:15

You hit a point. You can be very willing to help teach kids especially the older ones on business and tax but going through the hoops of the child protection stuff? Put of and can't be bothered even though understanding the reasons.

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By Richard Grant
12th Oct 2019 11:02

Having read the first paragraph it is possible to see everything that is wrong with companies like Deloitte and out tax system. " It also found that tax knowledge correlates with a perception of fairness and a willingness to see taxes rise". What absolute BS.
This should actually read "large firms specialising is tax advise have no issue with rising tax and more complex systems because it increases their fees base".
What they should be doing (but there are no fees in it) is highlighting inefficiencies in the tax system, waste in Government at all levels and lobbying for lower taxes.
The whole "study" could be seen as an exercise in virtue signalling in the hopes of getting their snouts into another lucrative "steering committee" or "advisory panel".

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Stepurhan
By stepurhan
14th Oct 2019 08:56

The should taxes be increased or reduced question is a leading one. It directly links an increase with extending and improving public services and a decrease with reducing public services.

This should be an if link, not an assumed link. I doubt anyone would want to pay more in tax unless they were confident there would be an improvement in public services.

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By Rgab1947
14th Oct 2019 12:17

I am all for increasing taxes as long as I don't have to pay anymore.

Hence a certain party hoping this will win them the election to get to a Bolshevik Nirvana run by Unions.

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By Anthony G Thorne
14th Oct 2019 10:09

This I would suggest is another argument for a total reform of the UK tax system in line with MTS (Make Tax Simple) and reducing the reams of complex and archaic rules and regulations starting with the 5 April year end date.

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By Rgab1947
14th Oct 2019 12:18

Totally agree. Whats wrong with 31 March.

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By AndyC555
15th Oct 2019 09:56

It all began in 1582 when Pope Gregory XIII ordered a change of calendar from the Julian calendar, which had been in use since 42 BC.

The Julian calendar, which consisted of eleven months of 30 or 31 days and a 28-day February (extended to 29 days every fourth year), was quite accurate but not quite accurate enough. By the 1500s, the Julian calendar was behind the solar calendar by 10 days.

However, the British did not make the change in 1582, so there was a difference of 10 days between the calendar in Britain and the rest of Europe.

By 1752 the difference had increased to 11 days and so we changed to the Gregorian calendar in that year.

Until 1752 the tax year in Great Britain started on 25th March*. In order to ensure no loss of tax revenue, the Treasury decided that the taxation year which started on 25th March 1752 would be of the usual length (365 days) and therefore it would end on 4th April, the following tax year beginning on 5th April.

The next difficulty was that 1800 was not a leap year in the new Gregorian calendar** but would have been in the old Julian system. Therefore the Treasury moved the year start again from 5th to 6th of April, and this date has remained unchanged ever since.

(*25th March was, at one point considered New Year's day - something to do with the Archangel Gabriel visiting Mary on that day)

(**if you can divide the year exactly by 100 it isn't a leap year in the Gregorian calendar, unless you can also divide it by 400 - 1900 wasn't a leap year, 2000 was, 2100 won't be)

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