Friday April 16th, 2-4pm
Frank H. Pedersen - Complementing the Study of
Tax Complexity through the Concept of Usability
“The income tax is too complex” is a familiar statement. However, the tax literature does not contain any qualified concepts to establish what kinds of occurrences for the taxpayer would merit the label “complex.” What taxpayer experiences might warrant this labeling, and what distinguishes those situations from taxpayers’ ordinary well-managing of their tax affairs?
The statement that the income tax is too complex expresses the concern that taxpayers experience a welfare loss as a result of managing their tax affairs. Something negative might be happening as a result of taxpayers’ usage of the tax law, forms, and the like when they manage their tax affairs. There are some real occurrences in this use which could damage the taxpayers’ welfare. To be able to illuminate taxpayers’ welfare loss, a concept is required which is able to encapsulate such real occurrences. The term complexity is not helpful for interpretation of such occurrences.
A concept for studying the extent of well-managing in use, and thus whether any occurrences are damaging taxpayer welfare, does in fact exist. It is termed usability. The concept of usability precisely addresses the measurement of how well management or use is occurring, thereby presenting an answer to the question of whether the use is adequate or warrants criticism. The most widely acknowledged concept of usability is the one promoted by the International Organization for Standardization (ISO).
Instead of applying the term “complexity” for the result of an evaluation, the usability concept frames the question as concerning a higher or lower level of usability. Usability is measured in relation to whether users are able to complete their tasks, how many resources they have to spend, and whether the use is straightforward or causes frustration. Incomplete or abandoned tasks and excessive cost and discomfort are evidence of lower levels of usability.
Scholars have not previously applied this usability concept in a legal context. Hence, this Article introduces the ISO concept of usability to the income tax. The Article argues that the usability concept complements existing tax concepts and can contribute to the clarification of principles that are relevant to existing concepts, as well as elucidating the application of the term “tax complexity.”
The usability concept thus demonstrates general principles for assessing outcome of use. These principles are also valid for other concepts that measure real taxpayer occurrences, most notably compliance cost studies. Moreover, illuminating these principles reveals an important distinction between rules or other static phenomena, on the one hand, and on the other hand, real occurrences that happen to taxpayers, that is to say, outcomes of use. A higher level of complexity in the tax rules should not be conflated with a lower level of usability or thought necessarily to imply such lower usability level. Consequently, it is possible that the income tax can develop high levels of complexity in static phenomena such as the rules while simultaneously increasing levels of usability, allowing taxpayers to enjoy a higher level of well-managing of their tax affairs.