HAPPY TAX

Tax history shows that taxes can be seen as a burden. Tax evasion, tax avoidance and aggressive tax planning thrive nowadays. One of the core actions that national governments and international bodies have to develop as their strategy is fighting these behaviours. Recent (2015) OECD Base Erosion and Profit Shifting (BEPS) reports document that. But maintenance of harmful tax competition supports those options affecting tax systems fairness and subsequently tax perception. Because public revenue is still needed to assure public action, non-mobile tax bases are more taxed, when comparing to mobile-tax bases. And that unbalance tax relations between Tax Administrations and citizens and between citizens.

But another part of the problem is complex societal challenges. Generated as a result of demographic changes and globalization (e.g. unemployment, especially youth unemployment, new forms of poverty, migration, Welfare State crisis), they evolve permanently, as social sciences research. They represent pressure to public policies, defying public action. And it must be taken into account that on developed countries, media coverage makes those social problems more visible to citizens that start putting into question why they pay high level of taxes and still social problems are not efficiently answered.

Under these framework, taxation’s primarily objective is collecting means to manage public action. Financial and economic crisis stressed it. The need to decrease public debt and budget deficit enforced tax collection as a main concern for Tax Authorities. Building public finances equilibrium is a major worry if a State wants to keep international ratings at good levels and access to financial markets as a possibility. Portuguese and Greek bailout (2011) exemplify this.

But taxes can have other objectives. And good one’s. Extra-revenue taxes exemplify that. For example, fat tax and tobacco tax aiming at health protection; green taxes and environment sustainability; investment-friendly tax benefits and economic growth, all are proof. So why not target happiness as a tax goal?

A new paradigm can be considered. We must understand if there is proof that taxation and happiness can go hand-in-hand. OECD has a Better Life Index. Bhutan has a Happiness Index instead of GDP. One can find a Happy Planet Index. These are only examples of how traditional methods are being complemented. If it can be demonstrated that happiness comes as persistent goal of individuals, if the State is created for the common good, if indexes evaluate collective achievement and even happiness, tax law should be aware of that and absorbed it.

The concept of happiness within law research is not common. Happiness is mainly studied from economic, sociological and psychological perspectives. Some legal researchers discuss if public policies should aim at happiness, and subsequently if law can help achieve it (e.g. What Kinds Of Public Policies Promote Human Happiness? ,Patrick Flavin, Baylor University, and Benjamin Radcliff; Happiness in Public Policy, Laura Musikansk). But taxation has not respond to this. Presently, tax research on happiness address the problem in a specific way. It focus on a certain detail in tax system (e.g. type of tax rates, progressive or proportional – Progressive Taxation And Happiness, Thomas D. Grififth), and discuss the topic taking into account a micro perspective. But when we talk about tax perception and happiness it becomes clear that a macro perspective analysis of taxation has to be made.

The aim of the project is divided into four aspects: (I) understand tax perception, in terms of happiness. For that it is necessary to determine how we define happiness; (II) establish the link between happiness and taxation; (III) test the link between tax and happiness and (IV) identify and shape effective mechanisms that change tax perception.

(I) Understanding tax perception and creating a concept of happiness implicate methodological boundaries, based on a multidisciplinary approach:

  1. Mustn’t the focus be collective happiness?
  2. Is individual happiness relevant to taxation?.

(II) Establishing link between happiness and taxation involves answering important questions:

  1. Is the connection between happiness and taxation a desirable, utopian or feasible one?;
  2. Can history of taxation help identify the major links between taxation and tax perception?;
  3. Are the reasons to pay taxes one of the links between tax and happiness?;
  4. Do public budget constraints affect the link between taxes and happiness?;
  5. Can tax compliance create happiness?.

(III) If the link between happiness and taxation is found, testing the link impose an analysis of multi variables that produce impact on how tax perception is formed. E.g. type of tax system, level of income, wealth and expenses, level of taxation, level and guarantee of social protection, social background, political background, level of state action, quality of public good and services. After analysing all those variables it must be studied whether it is possible to create a Happy Tax index.

(IV) In every hypothesis of links between happiness and taxation – desirable, utopian or feasible – identifying and shaping effective mechanisms that change tax perception is important. It will lead the research towards new ways of understanding taxation, based on a holistic perspective. Some triggers must be analysed:

  1. Does tax perception depend on the way tax revenue is applied?;
  2. Are responsible public spending and tax accountability important to tax perception?;
  3. Does successful fight against tax evasion, tax avoidance and aggressive tax planning modify tax perception?;
  4. Do extra-revenue taxes influence tax perception?;
  5. Do tax education affect tax perception?;
  6. Does legal tax language influence tax perception?

Work in progress…