The more stable the tax regime, the easier it will be for taxpayers to engage with it.
Research has shown clear correlations between tax revenues as a percentage of GDP and rates of economic growth (Tax capacity and growth: is there a tipping point? (2016) Gaspar, V, Jaramillo, L and Wingender, P, read here), as well as between levels of tax morale and compliance with levels of wealth and education (Tax morale: what drives people and businesses to pay tax? OECD 2019, downloadable here). Levels of tax morale reflect taxpayers’ perception of whether they are being treated equitably.
ACCA does not seek to enter the political debate on the appropriate level of tax and public spending. But substantial tax increases represent a significant burden on businesses and individuals, and should be subject to an impact assessment before being introduced. These impact assessments should be used to challenge the need for new regulations and to establish an accurate and updated estimate of costs.
Once new measures are put into place there should be a means of measuring and evaluating their impact on achieving their proclaimed public policy objectives. Governments should rationalise and set a target of tax levels as a percentage of GDP as part of their economic management and then be held to account via objective measurement and variance analysis.