TAXATION AWARENESS AND ITS IMPACT ON FINANCIAL LITERACY

For Russia to become a socially oriented country its population should be kept well informed about the current tax legislation. The article discusses the concept of tax awareness and its relation to the concept of tax culture. The author describes the measures necessary to raise tax awareness in the Russian society, which involves increasing the population’s knowledge about tax legislation and identifying the factors preventing people from paying their taxes on time and in full. Raising tax awareness is also linked to enhancement of financial literacy among various age and gender groups with different tax status. Conceptually, this research is based on the attribution theory, planned behaviour theory and the social learning theory. The author sought to prove the hypothesis that the state is not interested in increasing the population’s tax literacy, which is one of the main components of financial literacy, because the government is incapable of answering the questions: how can citizens exercise their right to free education, free health care and social benefits, and who is actually entitled to these services and benefits? Methodologically, the research included a survey of heterogeneous social groups with different age, gender, social and tax status: young people, students, employed population, retirees, tax residents and foreign nationals. The article outlines measures that can keep people informed about tax legislation. Respondents were asked to rank these measures on a scale of one to five according to their importance. The article also describes the factors preventing law abiding citizens from paying taxes to budgets of different levels. These are the factors that tax authorities and the Ministry of Finance should be dealing with in the first place


Introduction
To improve financial literacy of the Russian population, the government of the country introduced "The Strategy of Financial Development of the Russian Federation until 2020".To realize this strategy, in 2011, the federal special-purpose five-year program "Financial Culture and Security of Russian Citizens" was launched.It is important to note, however, that this program is not included in the list of state programs on the web-site "Portal of State Programs of the Russian Federation" 1 .
This program is aimed at enhancing financial literacy of the Russian popula- 1 Portal of State Programs of the Russian Federation.Available at: https://programs.gov.ru/Portal/programs/quarterMonitoring?gpId=16 (data of access: 31.01.2017).tion (especially school and university students and adults with low and middle income), rational financial behaviour and decision-making and responsible budgeting.It is also meant to improve the system of consumer rights protection through the web-site of the Ministry of Finance "Love Your Money"2 , which was launched at the end of 2016.The project costs are quite high: according to the Ministry of Finance, the government is planning to allocate 113 million dollars, out of which about 88 million will be budget funds, that is, the project will partially be implemented at the expense of taxpayers.Moreover, it is planned to borrow 25 million dollars from the World Bank with the interest paid from tax revenues -the fact which the government must also keep in mind 3 .
It seems doubtful that people's financial literacy can be significantly improved without addressing the problem of tax illiteracy."Love Your Money" contains information only about the rights and responsibilities of taxpayers and there is no information about taxes and charges, not to mention the intricacies of taxation, in other sections of this site.In these conditions, how can citizens be expected to conscientiously perform their duties by paying statutory taxes and charges in order "to ensure the prosperity of Russia and fulfil their responsibility for their motherland to the present and future generations", as the Constitution puts it 4 ?
Nevertheless, taxpayers can use the official web-site of the Federal Tax Service 5 , which provides extensive information on taxes and charges, their payment procedures and calculations.This site also features a somewhat outdated schedule of educational events for 2015 with a quarterly list of discussion topics.There is no such schedule for 2016 and 2017, and likewise, there is no information about the aims, results and the target audience of such events and, what is more, no information about the current changes in tax legislation and no explanations or relevant examples, no judgements on administrative or court appeals against decisions of tax authorities.The results of nine-month work of the Russian tax authorities in 2016 are quite disappointing: according to just one on-site inspection, the amount of additional charges reached the unprecedented 13 million roubles (!) in 2016 in com- 3 Web-Site of the Russian Ministry of Finance "Enhancement of the Population's Financial Literacy".Available at: http://minfin.ru/ru/om/fingram/about/description/#ixzz4XeNRJ75X (data of access: 01.02.2017). 4Constitution of the Russian Federation, Article 57 as of 12.12.1993(revised version).parison to 9.5 million in 2015.At the same time we can observe a stable positive dynamics in taxpayers' trust.They positively evaluate the work of the Federal Tax Service in such spheres as anti-corruption enforcement (in 2016, 86 % of taxpayers believed that the Federal Tax Service is efficient in fighting corruption in comparison to 83 % in the same period of 2014).The percentage of taxpayers who found the quality of tax authorities' work to be satisfactory was 83.8 % in the nine-month period of 2016 in comparison to 79.3 % in 2014.The declaration, however, does not provide figures for each Russian region 6 .These indicators reflect improvements to the performance of the tax authorities in Russia but to achieve the desired result of 100 % the government should pay attention to detection and prevention of tax crimes and take steps to increase levels of tax awareness among the population and thus raise understanding of tax legislation and of the need to comply with it.In this respect Mayburov's study [1] seems to be particularly interesting and promising: he considers various strategies used by taxpayers to dodge taxes such as natural and induced opportunism as well as economic factors and factors of tax morality that underlie opportunism.Among such factors, he places a special emphasis on the general level of tax culture.

Literature review
Studies of tax evasion and tax debt in Russia [2][3][4] generally focus on enhancement of tax culture among the population but ignore tax awareness as well as the fact that there is no generally accepted understanding of the term "tax culture".This term was proposed by one of the leading Russian researchers in this sphere, Igor Mayburov [1], who defined it as the factor that "determines the level of social and state development and the awareness of their interconnection; it also shapes the way all members of the society understand their rights and the need to conscientiously fulfil their duties in the taxation sphere".Mayburov points out the fact that "taxpayers must not be required to fulfil their duties in good faith if similar requirements are not imposed on other actors of the taxation process (tax officials, judges, bailiffs, deputies, ministers and heads of government services, the prime minister and the president)".
On the contrary, international studies [5; 6] mostly concentrate on demonstrating and quantitatively evaluating the interconnection between tax awareness and tax evasion.These researchers contend that it is necessary to improve the population's financial literacy, which will result in a better understanding of tax legislation and improvements of individual tax behaviour.
According to the report [6], tax awareness has two aspects: awareness that is acquired through general and formal education and develops naturally and awareness that deals specifically with ways and strategies of tax evasion.Taxpayers' educational background is a significant factor that contributes to the overall understanding of taxation, especially its laws and regulations and the ability to abide by them.But how can we raise people's tax awareness and at the same time prevent them from using this knowledge to cheat on their taxes?
To answer this question, we may turn to the experience of Indonesia, which managed to enhance its citizens' tax awareness and thus increase its tax revenues in the last five years.The main source of tax revenues is the income tax, which accounts for over 78 % of the overall state revenue 7 .In Indonesia, taxpayers undergo the registration procedure, calculate and pay their income taxes and afterwards account to the state for the tax that they have paid.What makes Indonesian taxpayers so responsible?The reason might lie in the government's wisely applying various theories in the spheres of psychology, social studies, taxation, civil law and 7 Available at: http://www.fiskal.depkeu.go.id decision-making to increase the level of individual civic consciousness and collective tax awareness.
Conceptually, our research is based on the attribution theory, planned behaviour theory and the social learning theory.According to the attribution theory [7], a person's behaviour can be attributed to an internal or external cause.Thus, taxpayers's willingness to pay taxes results from internal attribution -they understand that they are doing an important job of providing funds for the state.
The planned behaviour theory [8] deals with taxpayers' intentions, which are supposedly determined by three factors: -subjective behavioural beliefs; -normative beliefs, which refer to behavioural expectations of important referent groups or individuals; -control beliefs, which correspond to the perceived presence of factors that may facilitate or hinder certain behaviour (perceived power).
Thirdly, according to the social learning theory [9], a person can learn through observation and direct experience.This theory can explain taxpayers' behaviour in the following way: some people's observations and experience impel them to perform their tax duties on time, because thus they are demonstrating their agreement to make an individual contribution to the development of the state.Others pay taxes because they want to gain access to state services in exchange for their tax payments.The third group are forced to pay their taxes by tax penalties.
Arum [10] has shown that taxpayers are willing to pay taxes on time and in full if they are sure that it is important for the development of their country.
Tax awareness is also sometimes associated with taxpayers' willingness to pay taxes and charges without being forced to do so by tax authorities.Sometimes people are reluctant to pay taxes because they do not know what they can get in return.
Santi [11] argues that tax awareness has a significant positive impact on taxpayers' behaviour.When a tax inspector imposes a tax lien upon someone's property, they also take into account whether this person knows or doesn't know taxation laws.People should clearly understand the norms of tax legislation in order to fulfil their tax duties properly.In other words, this knowledge is essential to make people pay their taxes on time and in full.
The knowledge of tax regulations increases people's motivation to pay taxes since they become aware of the purpose of their payments -to meet the needs of their country and their people.Enhancement of tax awareness can minimize the level of corruption and fraud and can be used in combination with tax penalties, which constrain tax evasion [8].
Nurlis [12] identified the factors affecting taxpayers' willingness to pay and comply with the tax legislation.He divides these factors into four groups (Figure 1).

Knowledge of tax legislation
Tax sanctions

Services provided by tax authorities
Taxpayers' compliance with tax legislation

Figure 1. Factors of taxpayers' compliance with tax legislation
The studies of Devano Sony, Siti Rahayu Kurnia and Stephen Robbins [13; 14] show that tax compliance does not depend on technicalities such as methods of tax collection, taxation rates, technical supervision, investigation, tax penalties and provision of taxpayer services.Instead, it correlates with taxpayers' degree of awareness of the tax legislation.
Our research objective is to discuss the concept of tax awareness in the context of the Russian society and to identify the factors preventing the Russian population from paying their taxes on time and in full.These questions are also connected to financial literacy issues among different social groups of various ages, gender and income.We will also try to answer the question about the connection between "tax awareness" and "tax culture".

Results
We conducted a survey in the city of Ekaterinburg (Russia) among heterogeneous social groups with different age and gender characteristics as well as different social and tax status: young people, students, employed population, retirees, tax residents and foreign nationals.In our research we sought to prove the hypothesis that the Russian state is not interested in enhancing the population's tax literacy and financial literacy in general.Our survey was based on a questionnaire that included four sets of tasks: 1. True/False questions (Table 1).2. Ranking measures that could increase the population's awareness of tax legislation.The measures had to be ranked on a one to five scale according to their importance, from 0 (least important) to 5 (most important, obligatory).
3. Factors preventing law abiding citizens form paying taxes on time and in full.
4. Understanding of the term "tax awareness" and its connection to "tax culture".
The survey covered 283 people.The distribution of respondents according to their age, gender and tax status is presented in Table 2.According to Table 2, the majority of respondents were men (52 %) while women accounted for 48 %.As for the age, most respondents were young people between 20 and 27 years old.66 % of respondents had the status of tax residents and 34 % were non-residents.The distribution of respondents is graphically represented in Figures 2 and 3.
To assess the respondents' level of tax awareness we asked them to answer the questions shown in Table 1.The survey results are presented in Figures 4 and 5.
The majority of male respondents gave the maximum number of correct answers to questions 1, 3, 6, 9, and 10, which means that they have sufficient knowledge of such economic categories as tax, taxes paid by individuals, normative documents, participants of tax relations, and the possibility of choosing the taxation system.
Similar to men, women are sufficiently aware of taxes but they also know about the meaning of taxes and their functions.
As for the age distribution, young people aged 20-35 have sufficient knowledge of taxation as well as men aged 36-43 and women of 20-35 and 52-59, which can be explained by their interest in the designation of tax revenues, professional occupations, and being engaged in housekeeping finances.Older people -men over 60 and women over 67 -apparently have the lowest level of tax awareness.Both men and women, however, lack knowledge about the age of liability for tax crimes and about the rights of taxpayers, which proves our hypothesis that the lack of knowledge of one's rights leads to the lack of motivation to realize one's responsibilities.Therefore, this social category may be considered as potential tax evaders and the government should launch an awareness raising campaign among the young generation and their parents, such as "total dictations" ("total dictations" are popular educational events that are conducted in the form of an open voluntary test of Russian language).
As for the differences in respondents' income (see Figures 6 and 7), the following conclusions can be made.
Tax residents, in contrast to foreign persons, know the functions of taxes and the taxes which are to be paid by individual citizens and which are included in product prices.On the other hand, non-residents are more aware of the rates for calculating income taxes.Our respondents, however, did not know much about the age of tax liability and taxpayers' rights, that is, they lacked systemic knowledge of tax laws.
Residents of 20-43 years old demonstrated the best tax awareness and so did the older generation of 60-67 and non-residents -young people between 28 and 35 and middle-aged respondents (44-59).These categories are the most active participants of social relations with the state and it is necessary to teach and inform them.The experiment's second target was to rank the measures to enhance tax literacy on a one to five scale according to their importance, from 0 (least important) to 5 (most important, obligatory).The ranking is presented in Table 3.
According to Table 3, we can stimulate Russian taxpayers' trust in tax authorities and in the Federal Tax Service in general and, by doing this, also raise people's awareness of taxation.This way we can establish a dialogue between these two sides "on the opposite sides of the barricades" by pointing out that they actually pursue one common goal -to improve the living standards and the expectancy of life in the country and thus to ensure its future prosperity.
The third goal of our experiment was to find out what makes taxpayers fall behind on their taxes.These factors included the following: -lack of stability of tax legislation; -unlawful spending of budget funds and officials using budget money for personal gains; -undeveloped tax culture; -imbalance between the level of taxes and the population's actual level of income; -the government's consumerist attitude to taxpayers; -tax authorities failing to keep taxpayers informed about the amount of property taxes to be paid and payment deadlines; -centralization of tax revenues in the federal budget; -funding poor Russia regions through federal taxes and depriving more prosperous regions of the opportunity to use these funds for their own development; -including indirect taxes in the price of basic consumer goods, which decreases the level of the population's incomes low as it is; -replacing a large number of taxes with one tax obligatory for all categories of taxpayers; -national mentality.
Our survey results show that taxpayers are concerned about matters of tax literacy and that they understand that through paying taxes they contribute to the development of their country, which demonstrates how crucial this question is and supports our hypothesis that tax awareness influences financial literacy of various social groups.Our results have also brought to light the importance of the experiment's fourth objective: to give the definition of "tax awareness" in the economic context and to find how "tax awareness" and "tax culture" are connected.
We studied the legal documentation for taxation and found that both "tax awareness" and "tax culture" are absent from these sources as well as from the available reference materials (economic and tax reference books and encyclopaedias).It seems that the government have neglected these concepts, which is a deplorable circumstance since tax awareness and tax culture are the essential elements of the Russian taxation system.
Our analysis of the international research literature has demonstrated that tax awareness is considered as citizens' knowledge and understanding of tax legislation norms which they comply with in exchange for satisfaction of public needs [15].
Respondents were surveyed to find out whether the notion of "tax awareness" fits into the current Russian economic context.
The opinions of our respondents were divided (Table 4 and Figure 8).According to Table 4 and Figure 8, the majority of our respondents (39.2 %) chose the fourth option and believe that tax awareness should be seen as the taxpayer's knowledge of their rights and responsibilities.14 % think that tax awareness helps to reduce tax crime, and 11.3 % associate tax awareness with the information provided by tax officials on applicable taxes and charges, taxation schemes, tax relief and preferences.
Tax awareness comprises the following elements: -the knowledge of tax legislation as the core element; -participants of tax relationships, that is, taxpayers, tax authorities and the state; -rights and responsibilities of participants in the taxation sphere; -the system of taxes and charges; -liability for failing to pay taxes.Making no claims to know the ultimate truth, we nonetheless propose to define tax awareness as the system of knowledge about what constitutes taxes, mechanisms of their assessment and payment, choice of the taxation system, responsibilities and, what is more important, rights of taxpayers that allow them to protect their property from malpractices of tax authorities [16].
Tax culture corresponds to the level of social and state development at which the population has a clear understanding of the strong connection between the state and the society and knowing their rights and responsibilities in the sphere of taxation [1].Surprisingly, neither Russian nor international studies provide the answer to the question: what comes first -tax awareness or tax culture?These two economic phenomena determine the only acceptable relations between state agencies but how are they connected with each other?
To answer this question we need to refer to the logical scheme proposed by Mayburov [1], supplementing it with the necessary terms (Figure 9).Thus, tax awareness is shaped by tax mentality and tax morality, which allow taxpayers to gain enough knowledge of the subject and to develop the tax culture necessary to maintain tax discipline.

Conclusion
Tax awareness is one of the core areas the government should pay special attention to within the framework of the federal program of financial literacy enhancement.This program targets to improve the financial situation of the whole population and in particular low-and middle-income social groups, which are the most vulnerable.The population should become capable of rational financial decision-making, have effective budgeting skills and thus be able to pay their taxes.
Taxpayers should not be forced or bullied into performing their duties but instead they should be treated by the state as equal partners.This is the art that the government needs to master, especially in the regions, where tax offices operate.The country's tax authorities should conduct a well-organized campaign promoting taxpaying and explaining why it is important.
This research may be further developed to produce practical guidelines for enhancement of the population's tax awareness.

Figure 3 .
Figure 2. Age and gender distribution of respondents