Tax visibility

The politics of taxation are complex, but they are at least as influential on tax design as the factors already discussed. The community’s perceptions of tax and how those perceptions are formed is highly contested. This section focusses on one aspect of perceptions of tax, often called ‘tax saliency’, a technical term for visibility[49]. We acknowledge that other aspects are at least equally as important, particularly the public’s sense of how much tax is paid by the highly affluent.

Most people don’t like paying taxes, but some taxes appear to be more tolerated than others. A salient tax is obvious when it is applied, particularly when individuals need to actively remit the amount, such as taxes on capital gains, which usually result in a tax bill on assessment. By contrast, for other taxes the impact is either hidden or unclear, such as payroll tax. Highly salient taxes may attract more debate, prompt stronger behavioural responses and may be subject to lower rates of compliance.