Tax Literacy: A Canadian Perspective

Abstract

Tax systems are complex structures that can be difficult for individuals to navigate. Understanding the way taxes are calculated and liabilities are assessed matters a lot when personal saving for retirement and education, and much of the government's social policy apparatus, are closely integrated with the tax system. This study uses a survey to measure individuals' knowledge about basic elements of the personal income tax, their perception of their own tax knowledge, and their tax-filing behaviour. One would hope that tax-literate Canadians would have a high level of knowledge of the way taxes work, and a realistic appreciation of the limits of their knowledge, and thus that they could make informed decisions, for example, when filing their tax returns. The survey data show that Canadians have good knowledge of basic tax facts but struggle when asked more complex questions regarding the progressivity of the income tax. Results were generally consistent across provinces with the notable exception of respondents in Quebec, who had higher marks on the authors' tax quiz but lower self-assessed tax knowledge. The measurement instrument employed in the study will allow for a refinement of research exploring the drivers of tax compliance as well as political attitudes toward taxes and redistribution.

A behavioural investigation of the substitution phenomenon between tax-sheltered savings plans

“…If so, they can substitute for one another. Since individuals tend to have difficulty in understanding marginal tax rates (Chardon et al, 2016;Pham et al, 2020), and seem unable to process tax-related differences in both plans unless specifically prompted (Cuccia et al, 2022), we expect that individuals would categorize tax-sheltered savings plans similarly and will not distinguish between savings in a front-loaded plan and savings in a back-loaded plan. As a result, an increase in savings in one plan may lead to the decrease in savings in the other, at least partially.…”

“…(1) archival research using Canada data shows a partial substitution effect between the front-loaded RRSP and the back-loaded TFSA across all income quartiles (Berger et al, 2019), which suggests that differences in current tax rates do not explain the substitution effect documented archivally 5 ; (2) Tax literacy surveys suggest that individuals struggle to understand marginal tax rates (Pham et al, 2020) and lack confidence in their ability to understand marginal tax rates (Chardon et al, 2016); (3) 4 A TFSA is also preferable for low-income individuals who would otherwise be subject to GIS (Guaranteed Income Supplement) clawbacks on taxable RRSP withdrawals or OAS (Old Age Security) on taxable RRSP withdrawals. This issue is discussed in The Department of Finance's publication about tax expenditures: https://www.canada.ca/content/dam/fin/migration/taxexp-depfisc/2001/taxexp01_e.pdf.…”

Literasi Pajak Pertambahan Nilai (PPN) dan Perilaku Konsumtif pada Generasi Z

“…Literasi pajak merupakan bidang penelitian yang masih relatif baru sehingga belum ada konsensus tentang definisi dari konsep tersebut (Pham et al, 2021). Literasi pajak digambarkan sebagai kemampuan untuk memiliki pengetahuan, keterampilan dan kepercayaan diri untuk membuat keputusan pajak yang bertanggung jawab serta dapat memprediksi dengan benar implikasi pajak dari pilihan tersebut (Pham et al, 2021). Ibda (2019) mengartikan literasi pajak sebagai bagaimana seseorang dapat memahami dan menggunakan peraturan perpajakan untuk dapat membayar pajak sesuai kewajibannya.…”

“…Indikator literasi keuangan adalah tingkat pemahaman pada teori keuangan dan kemampuan dalam mengatur keuangan mereka melalui keputusan yang diambil (Otoritas Jasa Keuangan, 2017). Demikian juga literasi PPN, indikatornya mengikuti definisi literasi pajak dari Pham et al (2021) dan Bornman & Wassermann (2018), yaitu pengetahuan dan pemahaman tentang PPN. Pertanyaan dalam kuesioner terkait konsep dasar PPN dan praktik penghitungan PPN.…”

Kepatuhan di Tengah Kompleksitas Pajak: Apakah Literasi Memiliki Peran?

“…Wajib pajak yang memiliki pemahaman yang rendah mengenai regulasi pajak cenderung tidak patuh dalam menyelesaikan kewajiban perpajakannya secara sengaja ataupun tidak sengaja. Pada beberapa negara, regulasi pajak menjadi lebih kompleks semenjak kewajiban perpajakan dilakukan sendiri oleh wajib pajak atau self assesstment system (Borrego et al, 2016) Penelitian di Canada menghasilkan bahwa kemampuan literasi dan pengetahuan dasar mengenai pajak saja belum cukup untuk memahami dan melaksanakan regulasi pajak yang kompleks (Pham et al, 2021). Kompleksitas pajak memiliki 2 komponen utama dalam penentuannya yaitu, tax code complexity dan tax framework complexity .…”