Attitudes towards certain forms of hidden economy and

Attitudes towards certain forms of hidden economy and evolving communication strategies

INTERNATIONAL SITUATION 2

The campaign of the British Tax Authority (HMRT) • At the beginning of 2006 the HMRT started a huge campaign using multiple channels in order to suppress tax evasion. As a part of the campaign, the HMRT spent GBP 1. 6 million on commercials on the television. The commercials introduced natural situations of ordinary everyday people, for example an innkeeper showing off about not giving invoices, not paying tax and avoiding all derogatory regulations regarding him. • An individual surface on the Internet supported the campaign which made it possible to report information on tax evasion for the citizens. • The central message of the campaign was that the authority offered alliance and cooperation to the citizens, in order to fight the minority which damaged the interests of the community. The chosen slogan reflected this as well: “With your help we make sure that the tax evaders have no place to hide”. • Partially due to the success of the campaign, during 2006 the amount of the collected taxes increased by GBP 25 billion, which means an increase of 6 % compared to the previous year. 3

Namibia – Zero tolerance for corruption The Namibian Institute for Democracy started a welldocumented campaign (“Zero Tolerance for Corruption”) during 2004 against corruption. • establishing anti-corruption centers where the citizens are able to report shenanigans concerning corruption; • analyzing and collecting data from the press related to the corruption cases that became public; • Self-examining test which helps to measure the level of honesty; the real aim was to raise the awareness about the immorality of violating the norms. • Providing regular annexes (every 2 nd week) in newspapers: a. ) reviewing the relevant legal background; b. ) drawing tender, versifier tender; c. ) summary of the reasons why corruption exists; d. ) the different forms of corruption; e. ) social costs of corruption. The campaign had a slogan with a double meaning: “I blow the whistle on corruption” – referring the football referee appearing in the commercials and also meaning “I will report whenever I hear about corruption” (“whistle-blower” also meaning “traitor” in English). 4

Transparency International focuses on the youngest • During 2004 a special edition of the “toolkits” was released, aimed especially at the youth and children (from elementary school to university); this special edition contained actions aiming education, based on the experience of 11 member states of the TI. • The introduced initiatives included civics and general macro-economical knowledge as well as practice-oriented methods regarding concrete ethical dilemmas. The transparent, democratic functioning of the school got emphasized, as it is the given social pre-vision for the children. 5

SITUATION IN HUNGARY 6

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How to improve taxation moral? One out of four Hungarians is a potential tax-evader. • Most of them excuse themselves by saying “tax evasion is a national sport activity”, everyone does that if possible. • 27 percent of all Hungarians would avoid taxpaying if they would be “forced” to do that – “force” (financial-existential) is the most common excuse for tax evaders. 8

How to improve taxation moral? RECOMMENDATION: The self-convincing thoughts of the tax-evaders must be demolished. Tax evaders must be positioned as minorities; tax evaders inflict huge damage to the economy despite their low number. The related communication must therefore emphasize the common interests of the “honest majority” and the authorities. 9

Opinions about taxation Statement concerning taxation Percentage of answers Significant tax evaders will never be caught 81 No one should be punished as long as the politicians are not ahead with the good example 74 Tax evaders cause damage to all people 71 If the tax burden would be suppressed, more people would pay taxes 65 Because of the frequently changing legal background nobody is able to respect the law 64 Most of the tax evaders are entrepreneurs Tax income is not well used by the state Punishment has no preventive effect Lots of people pay no taxes because they think others do not pay as well 62 59 59 59 10

What to do with men? Men are more likely to commit tax avoidance. • One out of five men would avoid taxpaying if he would surely know he won’t be caught. This rate is only 12% in case of women. • 31% of men and 22% of women stated they would commit tax evasion if it would be a necessity because of financial reasons. 11

What to do with men? RECOMMENDATION: It is possible to reach and convince men through women, the security of the family playing a central role. Because of the different taxpaying attitudes of the two sexes, it is reasonable to address women directly through thematic television channels and magazines. It is also important to refer the serious penalties and other consequences of tax avoidance besides calculatability and financial safety. It could be helpful to create a “soap-opera world” with recurring actors in order to reach the target group. 12

Convince the youngest generation The younger someone is the more likely is that he or she will commit tax evasion. • Researches state that the youngest age bracket (aged 18 -27) has the most “infected” taxation moral. 38% of them told that they would commit tax evasion if it would be a necessity. The rate is 30% when talking about people aged 28 -47, and it is only 23% when talking about people aged 48 -67. 13

Convince the youngest generation RECOMMENDATION: Tax avoidance must be communicated as something “moldy”, reminding at the same time that it is a serious crime. Communication towards youth must emphasize on mixing tax avoidance with other, more serious crimes. It is important to set the values and interests youth against the values and interests of other generations; tax avoidance must be communicated as an oldish, outdated practice which damages the interests of the present generation in a long term (such as the case with smoking in other cultures). For university students (and for other, identifiable groups of the youth) to create platforms (for example: in a university, connected with other cultural activities, narrowed to 1 -2 topics) with high publicity it is a must. 14

Educate in high school People with a high school education are the most likely to commit tax evasion. The rate of tax evaders among people with school-leaving exam was higher concerning all of the questions related to tax evasion when compared to people with a university degree when compared to people who dropped out of the educational system after finishing elementary school. 15

Educate in high school RECOMMENDATION: Approach-forming activities and educational modules must play a greater role in the intermediate-level education. The abovementioned instruments must interpret how the taxation system works and what the meaning of common tax burden is; these instruments must also raise the awareness about the ethic conflicts concerning the “stowaway-effect”. The functioning of the institute responsible for the socialization of the students must not be neglected. It is desirable that the students of the intermediate level educational units know how the management of their school works and also, they should be able to influence it (for example determining the order of the asset acquisitions, developments, voting, running a so-called “Open School” initiation which is open to all schools in the country etc. ). 16

Firstly be honest than pay less tax The majority expects that if the rate of taxes would be lower than the rate of tax avoidance would be lower as well. • Two-third of the people asked claimed that if the rate of the taxes would be lower then more people would pay taxes for sure. (This opinion is very popular amongst people living in Budapest). 17

Firstly be honest than pay less tax RECOMMENDATION: The logical order must be reversed while communicating • It must be emphasized that the rate of the taxes can only be lower if the current moral of taxpaying improves. The political sphere must demonstrate its commitment; in the short term the administrative burdens and bureaucracy must be lowered and efforts must be shown to improve the transparency of the system. 18

Demonstrate the big fishes are also caught “The small fish tie themselves up to the nets of the taxation authority, but big fish tear them apart. ” • Four out of five people think that the most significant tax evaders will never get caught. This opinion is strongly tied to the level of education (characteristically people with intermediate level education think that). There is also a big difference concerning this question when talking about people living in Budapest (73% of them thinks this way) and people living in the countryside (80 -83% of them thinks like that). 19

Demonstrate the big fishes are also caught RECOMMENDATION: • Efforts must be made in order to publicize when a tax evader of greater volume is caught. Rich and influential people could also be caught and they must be aware of inspections as well – this idea must be emphasized and it can be demonstrated this way. It must be emphasized that the convicts of other crimes related to hidden economy avoided taxpaying as well and that it is a crime on its own which caused damage to the society. 20

Emphasize the solidarity • “Tax evaders steal from the common plate” – Most people (71%) is aware of the fact that tax evaders cause damage to all citizens 21

Emphasize the solidarity RECOMMENDATION: • The community feelings of the taxpaying majority must be strengthened by communication programs focusing on solidarity; these programs should show problems can be solved via public redistribution and how unpaid tax damages society (commercials, articles about the state of hospitals, kindergartens etc. ) It must be shown how far “public” reaches – the seemingly free public services are only possible because of the taxes. 22

What happens with my money? “Lawmakers are also responsible for the bad taxpaying moral” • 75% of the population thinks that as long as the politicians don’t act as a good example people should not be penalized for such behavior. This opinion strengthens as the level of education and the size of the village decreases. 82 percent of people with elementary school as the highest level of education and 79 percent of people living in a small village think the same way. “It is not necessary to pay taxes because the state doesn’t use them well. ” • 60% of the people think the state doesn’t use tax incomes well. Distrust is closely connected with the level of education: lower educated people are more critical towards state redistribution. The level of knowledge about the role of the state, the revenues and expenses is very low though. 30% of the people are “tax-conscious” concerning taxes connected to earnings; citizens know relatively well the kinds of taxes but they have no idea on the other sources of state revenues. 23

What happens with my money? RECOMMENDATION: • Citizens should know – at least on a basic level, using models – what happens with their money. Because of that the basics of the budgetary manners (revenues, expenditures) should be frequently published (for example in the form of free brochures, informative workshops, “information points” accessible in the countryside as well etc. ). • The weak moral of taxpaying in Hungary has several reasons; the most important is probably that the political forces are constantly accusing each other with corruption. The selfclarifying process of the politics, more effective anticorruption measures, civil initiatives and the enlightening campaigns could bring positive change in this field. 24

Unregistered work • 35% (which is twice as high rate than the average of the EU) of the Hungarians think that the reason beyond unregistered work is the high rate of taxes; compared to the average of the EU, only half that many people think that it is because of the low salaries. • Even if we compare Hungary to other Central. European countries, the rate of people who think that unregistered work cannot be condemned because of the high rate of taxes and low salaries is relatively high (40% of the Hungarian population thinks this way while the same rate is 25% in Poland an less than 20% in the Czech Republic). 25

Unregistered work • Hungarians are not only permissive towards unregistered work: they show willingness to participate in it as well. 19% of the asked people often work unregistered, while 20% of them would undertake such job if it would be financially beneficial. • Men tend to work unregistered in a higher rate than women; 26% of them stated that he often works unregistered, while only 12% of women admitted the same. Youth (25%), middle-aged people (23%), people with a high schoolleaving exam (25%) and people living in Budapest (24%) are more willing to work unregistered. • More than half of the citizens think that the risk of unregistered work is relatively low. 26

Unregistered work RECOMMENDATION: Campaigns aimed at enhancing awareness concerning taxpaying must present how the absorptions connected to the salaries help to secure the functioning of the social institutions and the financial security of the people who just left their work. People must be frequently informed about why absorptions were made and how are these connected with the expenditures. It must be emphasized that people who work unregistered (the employee as well as the employer) commit crime. The existence and the weight of the fines and other consequences must be made clear to the public. 27

Suppression of gratitude payments Gratitude payment is one of the most common phenomena of the Hungarian hidden economy. • Only 5% of the population says that the institute of gratitude payment is right and correct – still, one out of five Hungarian gives gratitude payment for his or her family doctor or at the clinic and one out of two Hungarians slips an envelope to the pocket of his or her doctor if he or she needs hospital care. 28

Suppression of gratitude payments Deliberative poll might be appropriate to raise the problem to the surface, therefore the opposing opinions could publicly conflict each other. • Practical implementation of deliberation could be a proper tool to talk about the problem and to have the opposite parties express their point of view; also, the population’s point of view (“why? ”) could gain publicity. Doctors and citizens could be confronted with each other, the data concerning the size and amplitude of the phenomena could become known etc. It would be possible for the stress inside the society of doctors to get to the surface, and the rarely heard arguments of the representatives of certain medical professions could gain some attention as well (for example the lack of political support). 29

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