Tax Fairness Model

Taxation system must be fair, clear and equivalent for all taxpayers and consumers. Tax fairness seems to have its own boundaries in the rules and regulation which benefit one segment of taxpayer’s population over another. According to Adam Smith in Zain (2003:25), the most important rule to achieve a successful tax collection is to be fair on taxation, where all the people in the country should involve in the finance matters of government, with their respective abilities, which is by comparing the citizen’s income with the benefit that they actually get. Some theories have been developed to provide picturization and as a reference, which can be used for the rule in fairness of taxation practise. As an example is in the theory of Gerbing (1988)

In conjuction with this theory, Christenseen et al (1994) also use the similar fairness theory that use by Gerbing (1988) to Australia. In this research, the results shows that dimension in tax fairness do exist. Follw the previous theory, Devos (2005) examines the variables which can be engaged in the basic economic deterrence model of taxpayer compliance.The test includes an examination of demographic and other variables implied in the social and psychological model. The result of this experiment give contribution for revenue collecting authorities and also for tax policy development. Giligan & Richardson (2005) and Richarson (2006) identify six dimensions of fairness which include the Five Dimensions of Christenson (1996) with middle income earners. They identified individualism or collectivism and power distance as important cultural dimensions in Hong Kong. Despite cultural differences, the result shows that they are no universal patterns exist cross culturally between tax fairness dimension and tax compliance

It is also related to the perceived justice of procedures and consequences of norm breaking. Wenzel (2003) found that there are various types of fairness, which is distributive justice, procedural justice and retributive justice, especially in the context of tax behaviour. Kirchler (2007) stated that, to define distributive justice, it majorly give importance on fair exchange of resources, benefits and costs, which is also equally important in horizontal, vertical and exchange fairness. Whereas, procedural justice give importance to the process of resource distribution. Leventhal (1980) found that, this justice are increasing when individuals accept the principle applied for the distribution of benefits and cost, as long as it is fair; and treatment by taxing person,as well as the person is friendly,respectful and supportive.Retributive justice is about the perceived fairness of norm-keeping measurement. Spicer and Lundstedt (1976) found that,retributive justice dominates when taxpayers agree with governmental tax audits and penalties for tax evasion. Unfair penalties and unconsidered tax audits of government can give impact to taxpayer’s behavior, in negative way. Hence, the study of fairness in tax system are very wide, there are still didn’t have any definite approach for