Understanding The Demand For Tax Disclosures: A Psychosocial Perspective

ABSTRACT

This study examines the demand for tax disclosures from a psychosocial perspective. It draws on the concept of “stop and search”, heuristics and rational choice models to understand how tax officers form suspicion and demand disclosure from taxpayers. The study is an interpretive tax study, which views demand for taxation disclosure as an institutional, organizational and socio-cultural phenomenon. Data was purposively collected from senior tax officials and tax consultants and was analysed using thematic approach to data analysis.

The study reveals that tax officials’ demand for disclosure from taxpayers is informed by cues including outcome of risk profiling and assessment, incongruity of tax returns, known tax offenders, informant reporting, third party information and the socio-economic and political status of taxpayers. Second, the study observes that minimal effort is made by tax officials in Ghana when it comes to third party information mining and harvesting. Finally, the study reveals that rational processes are used by tax officials when making disclosure demand decisions among large taxpayers, however biased heuristics are employed when dealing with small taxpayers.

The study makes the following recommendations: First, tax disclosure demand decision practices in large taxpayer office such as adequate risk management should be replicated in small taxpayer offices. Again the use of adaptive heuristics rather than biased heuristics should be encouraged in small taxpayer offices. Second, the study suggests that revenue authorities should intensify mining and harvesting of third party information. Third, small taxpayers should increase their knowledge of taxation in order to enhance their cultural and symbolic capital, hence increase their power during engagement with tax revenue officials. Finally, tax administration should encourage taxpayers to access the services of tax officers as this may increase voluntary tax compliance.