Social Acceptability of Tax and Transfer Schemes

In this paper we argue that the equity-efficiency framework usually used by economists to analyse taxation, based on the rational individual carefully calculating costs and benefits, is incomplete because it pays little attention to the social acceptability of taxation. This is not to deny that individuals pursue their own self-interest, but it is to say that their attitudes towards taxation are more complex than that. They also depend on factors like trust in government, perceptions of fairness, feelings of solidarity and reciprocity and their own ideas. These factors need to be factored in when policy proposals are made to reform specific taxes or subsidies, and even more so when they involve reforming various taxes or subsidies at the same time.