Some believe that the best way is to increase tax incentives 38 while others believe that the best way is to increase tax penalties. Tax knowledge, tax education, tax compliance, religiosity jel code. They are generally noted to play important roles in determining tax compliance franzoni, 1999. The authors first published a commentary on tax compliance, selfassessment and administration in new zealand in james, s. Aug 21, 2019 tax compliance is the degree to which a taxpayer complies or fails to comply with the tax rules of his or her country, for example by declaring income, filing a return, and paying the tax due in a timely manner. Tax complexity increases the likelihood that taxpayers are noncompliant unintentionally. These are commonly referred to as personal norms and social norms respectively, and have become the focus of studies based on social psychology theories explaining taxpayer behavior. Tax knowledge tax knowledge is an essential element in a voluntary compliance tax system kasippilai, 2000, particularly in determining an accurate tax liability palil, 2005. H21, z12 introduction thus, the papers aim is the role of religiosity in the relationship between tax education and tax knowledge towards tax compliance. But of what effects has this tax education on the level of. Tax compliance law and legal definition tax compliance is the degree to which a taxpayer complies or fails to comply with the tax rules of his or her country, for example by declaring income, filing a return, and paying the tax due in a timely manner. Tax compliance and its determinant the case of jimma zone, ethiopia 1amina ahmed 2 saniya kedir, 1,2 msc, jimma university, business and economics college email.
The results suggested that tax knowledge has a significant impact on tax compliance even. The increased attention to tax penalties raises the potential for legislative mischief. Re searchers must, therefore, consider different approaches to measure it. Factors that affect tax comp liance among small and. For this purpose, they are appropriated a finite level of resources, meaning that careful decisions. An examination of the role of ethics in tax compliance decisions. The authors identified 18 studies meeting the above criteria. The traditional approach is to use informa tion from audits, from tax amnesty data or from ques. The bookmarks to the left are provided for your convenience in navigatin g through this document.
Using the tpb, tax compliance is conceptualized as a function of three broad factors. Does vat have higher tax compliance than a turnover tax. Do higher tax rates encouragediscourage tax compliance. Effect of tax payers awareness, knowledge tax, tax sanctions, accountability and public service on taxpayer compliance motor vehicles. Select an interest area below to access that specific content or browse to see all that we have to offer. After briefly laying out the economics of tax evasion, it focuses on recent empirical contributions. Tax compliance has evolved into a major research topic in economic psychology. Tax compliance, income distribution and social norms. Income tax noncompliance of small and medium enterprises in malaysia. Economic factors of tax compliance in the tradition of tax compliance research, a number of factors have been considered important for explaining tax compliance. Tax compliance and enforcement american economic association. Jan 28, 2011 in this article we argue that puzzle of tax compliance can be explained, at least in part, by recognizing the typically neglected role of ethics in individual behavior. This paper studies the effect of income inequality on tax evasion. Therefore, this study was conducted using smes in zaria, northcentral nigeria to evaluate and rank the factors that encourage noncompliance with tax obligation by smes.
International journal of business, economics and law, vol. In fairness, the two competing models of taxpayer compli. Governments could try to generally simplify tax administration for businesses. Tax education is being provided as one of the tool to enhance voluntary tax compliance among the entrepreneurs in the smes. To discuss the topic, we present a simple model, based on benabouand tirole 1, that incorporates incentives for tax compliance such as punishment and fines, intrinsic motivation and social norms. Kaplan 2005 an examination of the role of ethics in tax compliance decisions. Since we consider a regressive system of incentives to comply, income inequality increases the value of tax evasion. Factors that affect tax compliance among small and medium. Tax knowledge, penalties and tax compliance in small and. Tax evasion is illegal while tax avoidance may be legal, but from the economic point of view, they are similarly costly and tax avoidance should be a higher priority target. Tax compliance law and legal definition uslegal, inc. However, studies on tax compliance have shown that among all taxable persons, selfemployed persons and individuals are the most predisposed to. Tax compliance, selfassessment and tax administration journal of finance and management in public services.
Managing and improving tax compliance 6 summary all revenue authorities are generally required to achieve as good a compliance outcome as possible i. These range from major financial penalties and sanctions to reputational and customerrelated risks, prompting shareholders, the csuite, and boards and committees to take note. New zealand journal of taxation law and policy, vol. Since allingham and sandmos 1972 pioneering work, there have been numerous empirical studies testing theoretical models and identifying the determinants of tax compliance alm 1999, alm et al. Article pdf available in journal of economic surveys 332 june 2018 with 5,080. Note that tax eva sion is an illegal and shadow activity and its undercover nature makes it very hard to obtain reliable data. In this article we argue that puzzle of tax compliance can be explained, at least in part, by recognizing the typically neglected role of ethics in individual behavior. Slippery slope framework, tax morale and tax compliance. Tax compliance 201 social norms and panayiotis nicolaides. Tax compliance is the degree to which a taxpayer complies or fails to comply with the tax rules of his or her country, for example by declaring income, filing a return, and paying the tax due in a timely manner. The effect of taxpayer awareness, tax socialization, tax. Aug 26, 2019 we study the tax compliance effects of valueadded tax vat by exploiting the reform replacing business tax bt with vat in china beginning in 2012.
Using natural field experiments to enhance tax compliance, journal of public economics, elsevier, vol. Theories on tax compliance there are various opinions as to the best ways to improve tax compliance. The definition, measurement, and evaluation of tax. After briefly laying out the economics of tax evasion, it focuses o. The basic idea in the theory is that tax compliance is a function of three broad factors. We find that replacing the bt with vat significantly increases reported sales and reported cost for treated firms, and the impact is much stronger among businesstobusiness b2b transactions than businessto. The taxation and existence of tax knowledge and tax compliance among smes.
Therefore, this study was conducted using smes in zaria, northcentral nigeria to evaluate andrank the factors that encourage noncompliance with tax obligation by smes. Costs and compliance issues in malaysia, journal of applied law and policy, vol. In these cases, taxing authorities would use their administrative authority to develop the sampling methods. Tax compliance, selfassessment and tax administration. International journal of scientific and research publications, volume 7, issue 11, november 2017 687. Examining the determinants of tax compliance by experimental. At the same time, special responses targeted at smes are conceivable. Machinereadable bibliographic record marc, ris, bibtex document object identifier doi. Voluntary assets and income declaration scheme vaids and tax compliance in nigeria a survey.
Pdf voluntary assets and income declaration scheme vaids. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Hoelzl and ingrid wahl, enforced versus voluntary tax compliance. The framework proposes that by combining complementary investments in enforcement, facilitation, and trust, reformers can not only strengthen.
New research and its policy implications, authorjoel slemrod, year2016. The interest generated by the subject matter of tax compliance behavior has led to identification of several factors that are believed to influence. Article pdf available in journal of economic surveys 332 june 2018 with 4,986 reads how we measure reads. The determinants of individual income tax compliance. Individual income tax compliance estimating the impacts of tax policy, enforcement, and irs responsiveness department of the treasury internal revenue service publication 1916 rev.
The details of a tax relief are specified in the tax law, and there. Given the opportunity, a lot of businesses will not pay taxes unless there is a motivation to do so. Along with the uncertainty about how the tax system will respond to continued globalization of business, there are tremendous risks associated with corporate taxation. Recent research on tax administration and compliance. Control variables were added in both stage 3 and stage 5 in order to assess whether the inclusion of control variables significantly affects tax compliance behaviour. This paper presents a conceptual framework for developing more effective approaches to tax reform and compliance. Published in volume 57, issue 4, pages 90454 of journal of economic literature, december 2019, abstract. However, studies on tax compliance have shown that among all taxable persons, selfemployed persons and individuals are the most predisposed to tax noncompliance compared with employed persons. Policymakers regard the tax gap as a pressing problem, and they respond in part by ratcheting up penalties. Practitioners in tax compliance, journal of public economics, september 1993.
Compared to the original guide, the update focuses more on influencing behaviour. Tax compliance and enforcement, journal of economic literature, vol 574, pages 904954. It may also be reproduced in any academic journal indexed by the. We find that replacing the bt with vat significantly increases reported sales and reported cost for treated firms, and the impact is much stronger among businesstobusiness b2b transactions than businesstoconsumer b2c transactions. We study the tax compliance effects of valueadded tax vat by exploiting the reform replacing business tax bt with vat in china beginning in 2012. Tax simplification and tax compliance columbia university. At least two policy responses to the problem of compliance costs are conceivable. Therefore, this study was conducted using smes in zaria, northcentral nigeria to evaluate andrank the factors that encourage non. Pdf voluntary assets and income declaration scheme. An examination of the role of ethics in tax compliance. Determinants and tax compliance costs hijattulah abdul jabbar this thesis is presented for the degree of.
Introduction the problem of tax compliance is as old as taxes themselves. The slippery slope framework, journal of economic psychology, vol. Can governments increase tax compliance by rewarding honest taxpayers. Tax is an important stream of revenue for governments development projects. Regarding tax compliance costs, the need to recognise the presence and regressivity of tax compliance costs upon smes should be, at this stage, recognised at the national level. Characterizing and explaining the observed patterns of tax noncompliance, and ultimately finding ways to reduce it, are of obvious im. Income tax noncompliance of small and medium enterprises in. The study examined tax compliance of small and medium enterprises sme in a developing country. Feb 06, 2014 along with the uncertainty about how the tax system will respond to continued globalization of business, there are tremendous risks associated with corporate taxation. The perception of tax payers on tax knowledge and tax. The characteristic nature of smes pose a threat to the voluntary tax compliance. This study offers an overview of the theoretical foundations for explaining tax compliance behavior.
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