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

unfair and also their exchange with the government not fair. However the tax preparerwho is acting as the middle men between the client and the enforcer perceive the systemfairer. To test whether taxpayers’ are happy with the benefits they receive in exchange forthe taxes they pay, the exchange contract between taxpayer and the government was usedas a measure of fairness by Porcano (1988). Using 18 variables that were predicted toaffect tax evasion, Porcano, (1988) found that exchange with government was the onlyvariable that correlated with tax evasion. This study also referred to procedural justice(the procedure involved in the formulation of tax laws and enforcement strategies) to beincorporated as a measure of fairness. Porcano (1992) quoted Gerbing (1988) in hisstudies that exchange with government to be one dimension of tax fairness.In this context the equity theory predicts that taxpayer evaluate their contribution of taxfor the benefits that they can receive from the government. So if there are theconsiderations of equity in their decision then if they receive a public transfer (benefits)then they would comply as compared with those who didn’t receive. So equity matters todecision making on compliance and how it relates with their perceptions of fairness.However, to say that there is causal relationship between inequity and tax evasion(noncompliance) is not possible because of the uncertainty whether the reason is becauseof inequity or simply a means of excusing one to illegal behaviour, as indicated by Spicer& Becker (1992).There was no significant evidence to say that fairness affects their decision in complying.However if taxpayers consider equity is important then it will affect their decision so it isimportant to explain to them the return that they get from the government for their tax36