The Australian tax survey of tax scheme investors

Survey methodology and preliminary findings for the second stage follow-up survey

• Kristina Murphy, Bevan Murphy
• Alfred Deakin Research Institute

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30 April 2010In 2002, Kristina Murphy from the Centre for Tax System Integrity at the Australian National University conducted a national survey of 6,000 Australian taxpayers that had invested in tax planning schemes. According to the Australian Taxation Office (ATO) these scheme investments were largely funded through tax deductions, with relatively little private capital being at risk. The ATO therefore believed that these schemes exploited loopholes in the tax law and were designed in such a way to avoid tax. The anti-avoidance provisions of Part IVA of the Income Tax Assessment Act were applied to scheme related investments and action was first taken against investors in 1998 to recover the tax owing. Approximately 57,000 investors were issued with amended assessments telling them that they had to pay back taxes, interest and appropriate penalties.

In 2002, the Investors' Survey was developed to obtain a snapshot of beliefs, attitudes, and motivations held by a national sample of scheme investors. Specifically, investors' views of the ATO and the Australian tax system, and how they perceived the ATO managed the schemes issue, were sought. The survey was also designed to explore why taxpayers invested in tax minimisation schemes and why there was such widespread taxpayer resistance against the ATO's debt recovery procedures (see Murphy & Byng, 2002b for detailed findings).

In August 2004, a follow-up survey was conducted. The Follow-up Survey was posted to 1,250 respondents of the 2002 Investors’ Survey who had indicated that they were interested in participating in any subsequent research. A total of 659 completed surveys were received. The specific purpose of the Follow-up Survey was to investigate the long-term impact that the ATO’s actions had on taxpayers’ attitudes and well-being. Perceptions of injustice about the ATO’s dealings with scheme investors, how justice judgements may be formed, and the emotional impact the ATO engagement had on scheme investors’ lives were examined.

This report discusses the methodology and logistics for conducting the Follow-up Survey (Part 1), presents a descriptive analysis of some of the more important findings from the survey (Part 2), provides a detailed description of the scales used to measure a variety of concepts (Part 3), and includes a codebook that details the frequencies, means and standard deviations to each question of the second stage survey (Part 4).