Understanding the nature of vulnerability and its impact on tax compliance: case studies from the National Tax Clinic Program

Government products and services, including those related to tax, have been progressively transferred to an online environment over the last few decades to reduce costs of administration and increase convenience and access. To use online systems, citizens need to have the capability and willingness to engage with them. Many in society possess these attributes, but many do not. This has serious implications for the tax system with many taxpayers who are unable to fulfill their tax obligations, especially for those who suffer from one or more vulnerabilities that can impede their ability to engage with online systems. This article draws on case studies from the National Tax Clinic Program (‘NTCP’) to demonstrate how barriers to compliance created by vulnerabilities that taxpayer’s face can become progressively more difficult to overcome as further burdens are imposed by an online tax administration that exacerbate the impact of their initial vulnerability. Under the Australian Taxation Office’s (‘ATO’) Compliance Model, taxpayers who are willing to comply, but are having trouble, are supposed to receive appropriate and timely support to help them comply while its digital inclusion strategy and framework are supposed to recognise the differing ways that taxpayers engage with it online and adapt online support to suit. Furthermore, the ATO’s Vulnerability Framework aims to support people experiencing vulnerability by recognising the vulnerabilities they face and tailoring solutions to help them meet their obligations. Therefore, these case studies also highlight how the ATO ought to change its approach to meet these taxpayers needs and help them to comply. With the Vulnerability Framework being newly released and moving to an implementation phase, the case studies can also inform how it ought to be implemented. The case studies also illustrate the broader social impact of the NTCP by not only helping taxpayers to comply with their tax obligations but also helping them get their lives back on track.