Young students key in the fight against tax evasion
Governments across the world are grappling with challenges posed by financial fraud, tax evasion and tax avoidance. As they strive to keep up with the global social and economic changes taking place faster than ever before, national tax authorities also have to look inwards, towards their youngest citizens, and ensure that they grow up with sound knowledge of the importance of paying taxes.
Empirical research shows that most people don’t take a rational approach to paying taxes; in other words, they will not pay them simply out of fear of getting fined or otherwise reprimanded for not doing so. For a tax system to work, people need to understand why they are paying them, and actually feel the benefits of contributing to the common good.
This is why tax education is so important to cultivating tax compliance and discipline of citizens. And there is ample evidence to believe that the earlier you start teaching people about taxes, the better.
In the OECD’s 2019 Tax Morale report, age was found to be one of the main determinants of tax morale globally, with younger people more likely to cheat on taxes than older citizens. This suggests there are significant gains to be made through educational efforts targeting the younger generations, and that building solid taxpaying habits early in a citizen’s life can return a significant dividend over the years . The TAXEDU portal was established on the very same principle: that educating young students about taxes is a key tool in preventing and reducing tax evasion and fraud across Europe.
Short educational tax programmes can do the trick
A recent paper, ‘Addressing Evasion and Tax Morale by Educating Young Taxpayers’, co-authored by Deputy Director General of the Slovenian Financial Administration, Dr. Simon Starček, explored the importance of national tax administrations in educating students about taxes. Specifically, the study looked at the impact of short educational programmes on tax morale and tax compliance of pupils in primary and secondary schools.
The results of the study showed that tax morale of Slovenian primary and secondary school pupils slightly declines with age, that the educational background in a student’s household is strongly linked to their tax morale, that household affluence has a negative impact on tax compliance, and that attending educational programmes significantly increased both tax morale and compliance.
Particularly the last point is key. While integrating tax into nation-wide school curricula makes it possible to reach almost all future taxpayers, this is not always immediately feasible: it takes time and resources, and requires dedicated actions of both tax administrations and schools. A key finding of the study is that even alternative, smaller scale programmes can be implemented and still produce benefits in tax moral and compliance of young citizens. National tax authorities across the EU are already spear-heading such initiatives, many of which are reported in the TAXEDU newsroom.
The authors highlight that another aspect to consider when designing and implementing tax education programmes is the need to provide resources not just for the students, but also for the teachers. Not all teachers may be sufficiently tax literate themselves to educate their students on how taxes work and why it’s important to pay them. Initiatives like TAXEDU help address this challenge by providing learning and teaching materials for both teachers and students of all ages .
Finally, learning about taxes from a young age brings a whole range of benefits beyond simply that of learning how and why you should pay them. Dr. Simon Starček and co-authors point out that dedicated programmes on tax education contribute to improved financial literacy, decision-making, security and ethical behaviour in general. The findings of a 2021 OECD report on taxpayer education is a case in point. It demonstrates that teaching tax to children can also be part of broader citizenship education, presenting an opportunity to build the social contract through helping children see the social utility of taxes, from their use to finance public services and institutions like schools, hospitals and the police to their redistributive function.