1 CHAPTER 1: INTRODUCTION 1.0 Chapter ... - DSpace@UM

2.2 Definition of Tax FairnessThe literature on tax compliance has suggested that equity theory, distributive justice andprocedural justice can give insights to examine tax fairness. Torgler (2001a) mentionedthat tax fairness is a very important factor influencing taxpayers’ compliance behaviourbecause it is related to tax burdens. In fact, Smith (1796) argued for any ‘good’ taxsystem tax fairness is crucial. McGowan (2000) stated that policy makers in the USbelieve that public perceptions can directly affect tax compliance behaviour.Spicer (1974), Song & Yarbrough (1978) found positive associations between unfairsystem and tax underreporting. Bordignon (1993) introduced fairness as an additionalmotivation to tax evasion or noncompliance. When there is lack of equity in an exchangerelationship it creates a sense of distress, with this anger it leads to a reaction which canrestore equity, which is tax evasion or tax noncompliance. Fairness is difficult to definebecause of the four inherent problems: (1) it is multidimensional, (2) it can be defined atthe individual level or for society at large, (3) fairness is intertwined with complexity and(4) a lack of fairness may be perceived justification or a cause of noncompliance(Christensen et al., 1994). According to Porcano (1984) referring back to the equitytheory which emphasis on horizontal and vertical equity, it is insufficient to bring out theconcept of fairness. Alternatively Porcano (1984) recommends distributive justice theoryto provide a stronger framework. In addition to equity, Leventhal (1976) and Deutsch(1975) have incorporated equality and need as an additional criteria for distributivetheory. Christensen et al., (1994) examined the influence of tax education on tax fairness22