The Impact of Taxpayers' Attitude on Tax Compliance Behavior: A study of Sole Proprietorship Holders in Sri Lanka.

This study aims to examine the factors that can affect tax compliance at Tanah Abang Market traders, which are the tax rate, perceived opportunity to evade, legal certainty, and group influence. This study uses a quantitative method with a positivism approach which examines social phenomena and captures the perceptions of MSEs actors on the determinants of tax compliance. The sample in this study were 154 MSEs respondents in Tanah Abang Market that were scope into Central Jakarta Regional Tax Office, both private individuals and corporate taxpayers. The results of the study revealed that the tax rate, perceived opportunity to evade, legal certainty, and group influence have a positive effect on tax compliance at Tanah Abang Market traders, but not significant only in the tax rate variable. This is very useful for the DGT authority and the Fiscal Policy Agency as policymakers that the reduction in tax rates does not affect the compliance behavior of MSEs traders and increase monitoring of compliance with MSEs taxpayers through derivative regulations on the implementation of supervision of MSEs taxpayers.

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Effectiveness of nudges on small business tax compliance behavior

Journal of Behavioral Public Administration ◽

10.30636/jbpa.32.141 ◽

2020 ◽

Vol 3 (2) ◽

Author(s):

Laura Leets ◽

Amber Sprenger ◽

Robert Hartman ◽

Nicholas Kohn ◽

Juli Simon Thomas ◽

...

Keyword(s):

Tax Compliance ◽

Business Owners ◽

Decision Makers ◽

Social Utility ◽

Effect Sizes ◽

Average Amount ◽

Compliance Behavior ◽

Potential Impact ◽

Reminder Letters ◽

The Impact

There has been a surge of basic and applied interest in exploring how small changes in decision contexts might be used to improve heuristic decision-making, “nudging” decision-makers toward choices that increase individual and social utility. The present study tested the impact of three types of nudges on tax compliance among delinquent businesses (n=3,130) in the state of Pennsylvania: (1) sending reminder letters that almost identically matched original tax delinquency notices, (2) sending redesigned reminder letters that simplified text and layout, increased the salience of critical information, and included an “Act Now” urgency statement, and (3) sending redesigned reminder letters with handwritten notes on the envelope. Redesigned reminder letters significantly increased the number of business owners who responded and the amount of delinquency paid within 15 days of receiving the notices. The addition of a handwritten note on the outside of the envelope did not additionally increase response rates or payment amount. Although the effect sizes observed in this study were small, the potential impact is large given the number of delinquent businesses and the average amount of taxes owed in Pennsylvania.

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How can tax compliance be incentivized? An experimental examination of voice and empathy

Review of Economics and Political Science ◽

10.1108/reps-05-2021-0053 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mariam AbdelNabi ◽

Khedr Wanas ◽

Sarah Mansour

Keyword(s):

Tax Evasion ◽

Explanatory Variable ◽

Public Spending ◽

Tax Compliance ◽

Arab Countries ◽

Social Implications ◽

Welfare Programs ◽

Content Type ◽

Compliance Behavior ◽

The Impact

PurposeTax evasion is an economic crime that nearly all world countries suffer from. Its consequences are countless, including poor public spending on infrastructure projects and social welfare programs, low economic growth and development, institutional mistrust and fiscal deficits. For developing countries in particular, targeting development programs and infrastructural investments requires an efficient tax collection policy to generate sufficient funds for such purposes. This makes the tax evasion problem a critical one and countering it extremely policy relevant. Based on evidence that shows how the understanding of taxpayers' behavior is an essential factor in fighting evasion, this paper aims to test different factors that might incentivize citizens using a behavioral and experimental approach, in non-Western educated industrialized rich democracies (non-WEIRD) countries, to comply more.Design/methodology/approachThis paper uses a survey experiment to examine the impact of different behavioral primes on tax compliance behavior. Specifically, it observes subjects' compliance behavior in two contexts: voice and empathy. A total of 273 students from a big public university in Egypt were randomly selected to participate in this study.FindingsIn the “Voice” treatment, the explanatory variable (VOICE) was found statistically significant, thus confirming the hypothesis that democracy, through having a voice in the decision-making process, affects compliance positively. As for the “Empathy” treatment, the explanatory variable (EMPATHY) was also found significant. This confirms the second hypothesis that triggering feelings of empathy, through highlighting the good cause behind public spending that uses taxpayers' money, affects compliance behavior positively.Research limitations/implicationsDespite the fact that the experimental methodology is a methodology with high internal validity, examining the impact of a specific intervention on behavior, a replication of the experiment in other contexts might be useful in increasing the external validity of the findings. Specifically, conducting this experiment on a nonstudent sample might lead to even more powerful results by increasing the ecological validity of the results.Practical implicationsThis study advocates a more behaviorally informed public policy. Specifically, Egyptian policymakers are recommended to adopt behavioral nudges as a complement to existing policies. The authors believe the findings, if confirmed by repeated experiments (lab, lab-in-the-field and rational choice theories on both student and non-student samples) in a number of Arab countries, might also help in offering cost-effective nudges for the Arab world policymakers, where culture and the political context are to a great extent similar.Social implicationsThe findings of the study have a number of social implications. Higher tax compliance will enable higher levels of public spending on a number of social targets such as education, health and welfare programs.Originality/valueWhile the study builds on recent research examining how to incentivize tax compliance, it simultaneously seeks to make three contributions. First, the study design aims to apply recent advances in behavioral sciences (impact of voice and empathy) in a policy area that has not seen much use of such interventions in the Egyptian context (i.e. tax compliance). Second, the study is policy relevant in the sense that it aims to increase the effectiveness of existing government policies by complementing them with behavioral primes. Third, there is nearly no literature found applying this topic in a non-WEIRD country such as Egypt.

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EXAMINING THE INFLUENCE OF FAIRNESS PERCEPTION ON TAX COMPLIANCE BEHAVIOR OF THE LIBYA INDIVIDUAL TAXPAYERS: THE MODERATING TAX AWARENESS AND TAX COMPLEXITY

Humanities & Social Sciences Reviews ◽

10.18510/hssr.2019.7261 ◽

2019 ◽

Vol 7 (2) ◽

pp. 519-525

Author(s):

Morni Hayati Jaafar Sidik ◽

Gholam Reza Zandi ◽

Al Seddig Alshadli Ruhoma

Keyword(s):

Tax Compliance ◽

Fairness Perception ◽

Distributive Fairness ◽

Perceptions Of Fairness ◽

Compliance Behavior ◽

Tax Complexity ◽

Improve Compliance ◽

Definition Of ◽

Search Design ◽

The Impact

Purpose of Study: This study examines the impact of the perceptions of fairness among Libyan taxpayers in the Libyan income tax system, where a multidimensional model of justice was introduced. This extends the definition of justice from one to distributive fairness and procedural fairness, along with tax awareness and tax complexity as moderators’ variables. This study is one of the first studies that test the impact of tax awareness and tax complexity as moderators’ variables on tax compliance behavior in a country. Methodology: Despite the importance of collecting taxes from individual taxpayers, it is a little known about the behavior of tax compliance in general in the Libyan context. This is important for tax authorities to identify behavioral factors that may hinder the successful tax compliance so that remedial action can be taken to improve compliance behavior. It remains currently a severe challenge for the Libyan tax authorities. Results: The results of this research will contribute significantly to the paucity of current literature on the role of tax awareness and tax complexities as moderators’ variables on tax compliance behavior, particularly in developing countries. The serial exploratory search design will be used in this study. The sub-squares analysis will be used to analyze the surveys.

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A Study Between the Taxpayers’ Perception Toward the Tax Policy Changes and the Tax Compliance in Sri Lanka: A Tax Relief in Response to the Impact of Covid-19 Epidemic, and its Implications

Business Management and Economics Research ◽

10.32861/bmer.72.52.64 ◽

2021 ◽

pp. 52-64

Author(s):

K. G. Asela Gamini Bandara ◽

W. M. R. B. Weerasooriya

Keyword(s):

Sri Lanka ◽

Tax Policy ◽

Tax Compliance ◽

Primary Data ◽

Policy Changes ◽

Study Guides ◽

Tax Relief ◽

Epidemic Period ◽

The Government ◽

The Impact

Purpose – This paper primarily investigates the relationship between the taxpayers’ perception of the tax policy changes and the tax compliance in Sri Lanka. The researcher also aims to provide advice to the policymakers about the specific approach to be followed when considering the tax relief measures and also emphasizing the importance of maintaining a flexible tax policy during the epidemic period which will be crucial in meeting the revenue target of the government. Design/Methodology/approach-The researcher used questionnaires to gather primary data from 125 respondents and then editing to spot errors and omissions for the aim of creating necessary corrections and at last, apply statistical tools for data analysis using SPSS software. Findings – The results show that taxpayers’ attitudes toward the changes in the tax policy and tax compliance form a strong positive relationship and further, changes in its policy have a significant impact on their compliance level. Cronbach’s alpha exceeds 0.7 implies that instruments are sufficiently reliable for the measurement. Originality/value- This was the first study undertaken to explore the link between the attitude toward the tax policy changes and the tax compliance in Sri Lanka during the Covid-19 epidemic period. This study guides to fill up the existing research gap in the country and further, directions are also useful for future researchers to undertake an identical survey.

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Public governance quality and tax compliance behavior in developing countries

International Journal of Social Economics ◽

10.1108/ijse-11-2016-0338 ◽

2019 ◽

Vol 46 (3) ◽

pp. 338-351 ◽

Cited By ~ 1

Author(s):

Mohammed Abdullahi Umar ◽

Chek Derashid ◽

Idawati Ibrahim ◽

Zainol Bidin

Keyword(s):

Developing Countries ◽

Tax Compliance ◽

Socioeconomic Conditions ◽

Public Governance ◽

Socioeconomic Condition ◽

Content Type ◽

Compliance Behavior ◽

Governance Quality ◽

The Impact ◽

The Relationship

PurposeThe purpose of this paper is to explore the relationship between public governance quality and tax compliance behavior in developing countries in terms of what transpires between governments and citizens, leading the later to pay or to abstain from paying tax. The study argues that socioeconomic condition is a mediator in the relationship and explains how and why it is so.Design/methodology/approachThis study adopts the conceptual approach and connects the concepts through synthesis of literature and previous research findings.FindingsThe study concludes that socioeconomic condition mediates the relationship between public governance quality and tax compliance behavior in developing countries. Socioeconomic conditions appear to be a broader, clearer and more practical concept for measurement purpose than public goods/spending as currently understood in the literature.Research limitations/implicationsThe study is a conceptual effort, and there may a be need to undertake further empirical investigations. Developing countries vary in their socioeconomic conditions, and there is a need to acknowledge country-specific circumstances.Practical implicationsThe implication of the finding includes the need for further research on the concept of socioeconomic condition, and how and why it influences tax compliance behavior in developing countries. Stakeholders and governments should monitor the impact of policies and actions on the socioeconomic condition of citizens to ensure they are satisfied. Their dissatisfaction leads to the boycott of the tax system which adversely affects economic development.Originality/valueThis study makes an original contribution by exploring socioeconomic conditions as a mediator between public governance quality and tax compliance behavior in developing countries. It is a significant contribution that is capable of shifting the direction of tax compliance research in developing countries due to its practical realities.

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The Impact of Multiple Tax Returns on Tax Compliance Behavior

Behavioral Research in Accounting ◽

10.2308/bria-50976 ◽

2014 ◽

Vol 27 (1) ◽

pp. 99-119 ◽

Cited By ~ 3

Author(s):

Sudip Bhattacharjee ◽

Kimberly K. Moreno ◽

Debra A. Salbador

Keyword(s):

Essential Element ◽

Tax Compliance ◽

Mental Accounting ◽

Net Return ◽

Condition Versus ◽

Compliance Behavior ◽

Tax Returns ◽

Decision Environment ◽

The Impact ◽

Insight Into

ABSTRACTTax compliance research has used prospect theory to describe taxpayers' behavior finding that taxpayers with pending payments due (loss frame) report more aggressively than taxpayers with pending refunds (gain frame). Since taxpayers often file multiple returns and prior research has only examined the impact of single returns on compliance behavior, we extend the research by incorporating the element of taxpayers filing multiple returns (state and federal returns). This study compares taxpayers' behavior in a single net refund or single net payment due condition versus a multiple refund (larger refund and smaller payment due) or multiple payments due condition (larger payment due and smaller refund). Using mental accounting theory, the results show that taxpayers' aggressiveness shifts up in a refund position when the refund is presented as multiple returns rather than a single net return. Taxpayers' aggressiveness shifts down when their payment due position is presented as multiple returns rather than a single net return. While the results in the single net return conditions were consistent with prior compliance research, the results in the multiple returns conditions show a shift in taxpayer aggressiveness from prior research where taxpayers were less aggressive in the multiple payment due condition than the multiple refund condition. A path analysis lends insight into these results by finding that taxpayers' compliance behavior in the single net return and multiple returns conditions is driven by their affective reactions to their tax position. These results suggest that prior tax compliance research that has not incorporated multiple returns may be missing an essential element of the decision environment. These results also extend the growing body of accounting research on mental accounting by providing some initial insight into the role of affect on behavior for single versus multiple outcomes.

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Tax compliance is not fundamentally influenced by incidental emotions: An experiment

10.31234/osf.io/ra6ms ◽

2020 ◽

Author(s):

Janina Enachescu ◽

Žiga Puklavec ◽

Jerome Olsen ◽

Erich Kirchler

Keyword(s):

Electrodermal Activity ◽

Tax Compliance ◽

Emotional Valence ◽

Manipulation Check ◽

Emotion Induction ◽

Video Clips ◽

Compliance Behavior ◽

Compliance Decisions ◽

The Impact

The present study investigates the impact of incidental emotions on tax compliance behavior in an experimental setting. Different theories are divided about how experiencing incidental emotions should influence tax decisions and the few existing studies yield inconsistent results. Our aim was to investigate differences between three specific emotions, namely anger, fear, and happiness. This allowed a comparison in compliance behavior as a function of differences in emotional valence as well as in specific emotional qualities. For this purpose, a sample of 264 individuals participated in a tax experiment. After a baseline treatment, one of the three emotions was induced using video-clips with background music. Moreover, emotional arousal was assessed by measuring electrodermal activity. Manipulation check items as well as elevated arousal levels after the emotion induction provided support for a successful emotion induction. Nevertheless, we did not observe any tax compliance differences between the anger, fear, and happiness conditions. Our results speak against a fundamental role of incidental emotions for tax compliance decisions.

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The Impact of Multiple Component Reporting on Tax Compliance and Audit Strategies

The Accounting Review ◽

10.2308/accr.1999.74.1.63 ◽

1999 ◽

Vol 74 (1) ◽

pp. 63-85 ◽

Cited By ~ 21

Author(s):

Shelley C. Rhoades

Keyword(s):

Tax Evasion ◽

Tax Compliance ◽

Single Item ◽

Taxable Income ◽

Reporting Requirements ◽

Compliance Behavior ◽

Net Revenue ◽

Multiple Component ◽

The Impact ◽

Do So

Prior studies of the strategic interaction between taxpayers and the tax authority have focused on reported net taxable income and on audit policies designed to discover potential misstatement of that single item. This paper extends the literature by modeling taxpayer compliance behavior and tax authority audit strategies within the context of a multidimensional report of taxable income. Specifically, the study analyzes the impact of component reporting requirements on taxpayer incentives to misstate their tax liability. It also allows the tax authority to tailor its audit policy to consider all tax return information. In particular, the model permits the tax authority to audit return components sequentially: the investigation of a second component is conditional on the results of the first component's audit. The study finds that partitioning taxable income into a multi-component report reduces overall tax evasion and increases tax authority net revenue collections relative to a singlereport model of net taxable income. However, the impact on predicted evasion is not uniform across taxpayers. While some taxpayers reduce evasion, others with multiple opportunities to evade are more likely to do so when faced with multi-component reporting requirements.

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