In Australia, it is a requirement by law to lodge tax returns after the end of each financial year.This can be done personally or by use of registered tax agents at a cost.Tax returns covers the financial year from 1 July to 30 June and they are due by 31 October,delayed lodging of returns attracts penalties(Australian Taxation Office,2015).
The ATO is a non-corporate Commonwealth entity within the Treasury portfolio and serves four Ministers;treasurer,assistant minister to the treasurer,minister of revenue and financial services and minister for small businesses (Australian Taxation Office,2015)
Australian Taxation Office always carries surveys through phone and online surveys, discussion groups and individual interviews, depending on the type of research; ongoing or on-off research projects.Their research is mainly on their customers’ satisfaction and their attitudes.However, and they usually engage research companies to carry out the research on their behalf (Australian Taxation Office, 2015)
Most researches have focused on people’s attitudes toward taxation process, this opens up a gap for research on the most preferred method of lodging tax returns by the taxpayers.
This study therefore, seeks to; know the proportion of people who lodge a tax return using a tax agent; Whether there is a difference among the age groups in terms of their lodgement method; Whether there is a relationship between total income and the lodgement method; Relationship between total income and deduction amount and finally, find international students’ preference of tax return lodgement method.
Data for this research was obtained from a sample file from Australian Taxation Office (ATO).This is a secondary source of data.
This dataset was obtained from a sample file from Australian Taxation Office (ATO), which is secondary data, because it had been collected and documented already. This dataset is a subset of 2013-2014 individual sample file.
The variables in this dataset are gender, age, lodgement method, total income and total deductions.
Gender is numerical as it is coded 0 and 1, males and females respectively. Its measurement is nominal as one can only belong to one gender, either male or female
Age is numerical type of data.It was grouped and coded from 0-11, this measurement is ordinal because it was coded from high to low
Lodgement method is string data type.There are two methods of lodging tax returns, through the agent or personally, hence, its measurement is therefore, nominal.
Total income and total deductions are numerical types of data. Their measures are scale.
The data will be collected through face-to-face interviews guided by structured questionnaires; the data is unbiased, as simple random sampling will be utilized in selection of the sample.This means that each student will have equal chance of being included in the sample.
This is a primary source of data.
The variables in the dataset include the gender, age, and education level and lodgement method. All variables are numerical data type.
The graph shows that use of agents is the most preferred method of lodging returns by both gender. The proportion of males preferring use of agents (392/1000) is higher compared to the proportion of the females (339/1000).More females prefer preparing for themselves (143) than males (126)
The graph also shows that 731 individuals prefer use of agents to lodge their tax returns while 269 prefer preparing and lodging tax returns personally.
To calculate the confidence interval for proportions, we need to know the estimate of the population standard population, margin of error and confidence level.
In this case,
The proportion of taxpayers who lodge the return using an agent=731/1000=0.731
For 95% confidence interval, α=0.05 and α/2=0.025
Margin of error is calculated using the formula below
Margin of error=norminv(0.025,0,sqrt(0.731*(1-0.731)/1000)
The calculation yielded -0.02748 or about 2.748%.Only 73.1% of the taxpayers will use an agent to lodge their tax returns with a margin of error of +2.748% or -2.748% and the actual confidence level then becomes[70.352%,75.848%],
From the results, we can say we are 95% confident that more than half of taxpayers use agents to lodge their tax returns in Australia.
A bar chart is a suitable representation of this frequency distribution.
The distribution of lodgement method over age-ranges is approximately symmetrical. For the age-range 4 and 5 the preferred method is through agents while for the age-range 10 and 11, the preferred method is almost equivalent.
It also shows that younger people prefer preparing and lodging tax returns for themselves compared to those above 50 years. For all age-ranges though, use of agent is the most preferred method of lodging tax returns in Australia.
The young population preference for personal service can be attributed to their practical understanding for technology hence online method favours them. The young people also have little responsibilities compared to those above 50 years.
They might need to lodge different types of tax returns; they might be owning some businesses that also need to lodge tax returns. In order, to save time, use of agents therefore, is the most convenient method for those above 50 years.
Testing the relationship between age-group and lodgement method
H0: There exists a relationship between age group and lodgement method
H1: There is no relationship between age group and lodgement method
To test the relationship between these two variables, chi-square test is utilized because both variables are categorical. The pivot table shows the number of observations in each category.
From the pivot table, we then created observed and expected tables and further calculated the chi-square-value=0.0001295889.
The cells in the expected table had values greater than 5 hence; chi-square was suitable test of association. The assumption of independence of observations was also true.
Since our p-value is less than 0.05, we do not reject the null hypothesis and we conclude that there exist association between age group and lodgement method.
A bar chart below displays the distribution of total income amount and preferred lodgement method
The chart shows that taxpayers with more average total amount prefer using agents to lodge their tax returns while those with low total income prefer to prepare and lodge tax returns on their own. This can be attributed to the fact that, with more income at hand, the more the expenses for any individual as tastes and preferences change.
The descriptive of the total income amount resulted into mean= 58788.98 with standard deviation = 2500.417 and median= 43181.5, since the mean is greater than the median, the distribution of the total income amount is asymmetrical, which is positively skewed. There are no outliers involved.
The average income is higher than deductions for each group, more deductions are made when lodging is done through the agent as compared to those who prepare and lodge the tax returns for themselves. In addition, it is noted that those with higher average income prefer agents to do the work.
The correlation between income amount and deduction amount gives 0.30632, which shows that there is a strong relationship between the two-variables. The relationship is positive, indicating that an increase in income results into increase deductions when lodging tax returns.
Graphical representation of total income amount and total deduction amount for each lodgement method is as shown below
Conclusions
From our analyses, we note that there exists a relationship between lodgement method and all other variables under consideration. Younger people prefer doing it for themselves while older people prefer use of agents.
Use of agents is the most used method across gender .The proportion of males preferring use of agents(392) is higher for than for the females(339).More females prefer preparing for themselves(143) than males (126).
Taxpayers with more average total amount prefer using agents to lodge their tax returns while those with low total income prefer to prepare and lodge tax returns on their own. Also the higher the income level, the higher the deductions for tax returns.
Further research should be carried out to understand people’s choice of lodgement method. Reasons as to why many prefer use of agents to personal lodging of tax returns.
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