Fiscal Feelings

Purpose This study examines the use of three types of nudge messages (reciprocity, social norm, deterrence) as a tool to positively influence tax compliance behaviour of small business owners. Motivation Tax revenues are the main source of government income for many economies and it is through this revenue that citizens can benefit from public goods and services provided by governments. Increasing the level of tax compliance is a step towards a fair allocation of the tax burden and distribution of resources. Design/methodology/approach Data were collected using an online field experiment conducted with small business owners in South Africa as participants. Main findings The experimental results show that nudge messages have an impact on tax compliance behaviour. Exposure to a social norm or a deterrence nudge message has a positive impact on tax compliance when compared with control conditions. The relationship between the social norm nudge message and tax compliance behaviour was statistically significant. However, the results indicate that the impact of nudge messages on tax compliance behaviour is not always positive, as the reciprocity nudge message showed a negative (boomerang) effect when compared with control conditions. Furthermore, the results show tax compliance differences between message types, with the tax compliance difference between the social norm nudge message and the reciprocity nudge message being statistically significant. A similar statistically significant difference was observed between the deterrence nudge message and the reciprocity nudge message. Practical implications/Managerial impact The findings of this study can assist tax authorities in both developing and developed countries with designing appropriate nudge messages. Contribution This study improves understanding of the impact of nudge messages on tax compliance behaviour in a developing country. It provides evidence of the relative strength of reciprocity, social norms and deterrence nudge messages in influencing tax compliance behaviour. Additionally, it seeks to add to the body of knowledge related to how the effectiveness of reciprocity, social norm and deterrence nudges may be affected by perceptions of corruption and attitudes towards tax. The study also contributes to the body of knowledge by considering business taxpayers rather than individuals not in business.

Background: MSMEs dominate the Indonesian economy. The growth of MSMEs shows that the number of MSMEs is quite large and continues to increase every year, thus indicating that MSMEs may be able to generate tax revenue. Semarang City is no exception. However, the problem is that MSMEs still view taxes as a burden that must be minimized and there is a lack of supervision from the tax authorities. Purpose: The aim of the research is to determine the influence of personal norms and tax compliance intentions on tax compliance behavior in MSMEs for processed agricultural products in Semarang City. Design/methodology/approach: The researcher used TPB. The idea that social and moral norms originate from subjective norms is examined in this study. Social norms focus more on providing social expectations and often aim to maintain harmony in a group or society, originate from society or social groups, and are often taught or enforced through socialization, social supervision, and social sanctions. Moral norms focus on behavior that is considered right or wrong from a moral or ethical perspective, are often related to a sense of personal responsibility or justice, originate from internal values, ethics, religion, or philosophy believed by the individual, and can vary from one individual to another, although they are often also influenced by certain religious or philosophical teachings. Three variables personal norms, intentions, and behavior, were used in this study. The questionnaires were given to UMKM taxpayers for processed agricultural products in Semarang City, totaling 120 respondents. PLS-SEM was used for the analysis.Findings/Result: The first hypothesis is that personal norms have an impact on intentions. The second hypothesis is accepted which shows that tax compliance intentions have a positive and significant influence on tax compliance behavior. The Influence of Personal Norms on Intention where the statistical value for the personal norm and intention variables are respectively, the P value is 0.000 < 0.050 and the T statistic value is 7.706 > 1.96 so that the hypothesis is accepted. The Influence of Intention on Behavior, where the P value is 0.002 < 0.050 and the T statistic value is 3.117 > 1.96 so that the hypothesis is accepted. The Influence of Personal Norms on Behavior, where the P value is 0.000 < 0.050 and the T statistic value is 4.010 > 1.96 so that the third hypothesis - namely, that personal norms have a major impact on behavior is accepted. The Influence of Intention on Behavior where the P value is 0.002 < 0.050 and the T statistic value is 3.117 > 1.96 so that the hypothesis of intention has a major impact on behavior is accepted by the test.Conclusion: The behavior is very positively influenced by personal norms and the intention to comply with taxes in MSMEs for processed agricultural products in the city of Semarang. The implications are: The Importance of Tax Education and Counseling, The Role of Moral and Ethical Values in Tax Compliance, The Influence of the Social Environment, The Need to Improve the Perception of Ease in Paying Taxes. Originality/value (State of the art): Originality/value of this research is that this research highlights the importance of education and counseling about taxes for MSMEs, as well as the need for policies that support and facilitate the taxation process for this sector. Keywords: tax compliance, agricultural products, MSMEs, personnel norms, social norms

This study provides a comprehensive overview of the factors affecting the Tax compliance behavior of Vietnamese small and medium enterprises, through a case study of enterprises in Thanh Hoa City. From the model building and analysis of factors affecting the Tax compliance behavior of small and medium enterprises, the study quantified the level of influence of the moderating variable Tax knowledge. From the research results, the author will propose some recommendations to improve Tax compliance behavior in the coming time. This study uses the perspective of enterprises through stratified random sampling, collecting and analyzing survey data from 290 small and medium enterprises in Thanh Hoa city using smart 3.0 software. Structural equation modeling (SEM) was established to quantify the impact of 11 influencing factors and 1 moderating variable on Tax compliance behavior of small and medium enterprises. The research results show that Tax morality has the strongest impact on Tax compliance behavior and Tax morality has a moderating effect on Tax compliance behavior by Tax knowledge. This shows the importance of attitudes, ethical values and perceptions of enterprises towards tax obligations, and emphasizes that Tax knowledge plays an important role in improving Tax morality and promoting Tax compliance. In addition, the factors Auditability, Social Norms, Fine, Tax compliance cost, Trust in tax authorities play an important role in determining the Tax compliance behavior of small and medium enterprises in Thanh Hoa city. This study has important implications both theoretically and practically, especially in the context of small and medium enterprises playing an important role in the Vietnamese economy. The study clarifies the role of factors related to enterprises' attitudes and perceptions in Tax compliance. Finally, this study seeks to contribute to the broader academic discourse on corporate tax compliance by providing empirical evidence from the Vietnamese context, which can be applied to other developing economies with similar socio-economic structures.

Tax compliance among self-employed professionals is a critical issue for policymakers. This study employs a mixed-methods research design, combining both quantitative and qualitative approaches to investigate the behavioral factors influencing tax compliance behavior. The study identifies the key drivers of non-compliance, including psychological biases, perceptions of fairness, and trust in tax authorities. Factor analysis confirms that perceived fairness and tax morale are the primary drivers of tax compliance. Social norm campaigns and behavioral nudges are cost-effective strategies to influence compliance behavior, reducing the need for costly enforcement measures. These findings contribute to the existing literature on tax compliance by integrating behavioral economics with traditional compliance models. This research demonstrates that enhancing trust and ensuring transparency in tax administration can significantly improve voluntary compliance, particularly in a demographic that often operates outside conventional tax structures.

Purpose: The increasing use of technology and business complexity means that taxpayers must increase their knowledge in completing tax obligations. Theoretical framework: Tax compliance intention as a mediation was analyzed the relationship among tax knowledge, tax moral, tax rate and tax sanction on tax compliance. Method: A quantitative methods approach was used by distributing questionnaires to 350 of MSMEs in Indonesia. The multiple linear regression analysis result show that there is positive effect about tax knowledge, tax moral and tax sanction on tax compliance intention. Meanwhile, the tax rate does not influence on tax compliance intention. Results and Conclusions: Furthermore, tax knowledge, tax rate and tax sanction does not have influence on tax compliance behavior. Meanwhile, there is positive relation between tax moral and tax compliance intention on tax compliance behavior. Finally, tax compliance intention mediates the influence of tax knowledge, tax moral, tax rate and tax sanction on tax compliance behavior. The tax intention of MSMEs comply tax regulation give significant effect on tax compliance behavior. Research, Practical & Social implications: This study offers implications for tax regulator to conduct tax education for tax payer in order to develop MSMEs motivation intrinsic that can improve taxpayer intention to comply on tax regulation. Originality/value: Our novelty contribution of tax knowledge measurements on task risk knowledge and profit-tax knowledge dimensions can impact MSMEs intention to comply.

The studies in tax compliance, tax evasion and tax morale often largely focus on the economic and behavioural factors responsible for tax (non)compliance, but very little attempt has been made to determine the extent to which the sociodemographic characteristics of taxpayers influence their (non)compliance behaviour in Nigeria. Therefore, the current study examines the influence of sociodemographic characteristics of SME entrepreneurs on tax (non)compliance behaviour. Information on tax non-compliance behaviour and sociodemographic variables was elicited from (N = 382) SME entrepreneurs from six geopolitical zone divisions of Nigeria using a questionnaire and executed by survey research tradition. The results of the study reveal that certain sociodemographic variables including age, education and business sectors of the SME entrepreneurs are significant determinants of tax (non)compliance behaviour, while gender and religiosity exert insignificant influence. The study concludes that beyond economic sanctions, tax incentives and taxpayers’ attitudes, certain sociodemographic factors are effective in encouraging or discouraging tax noncompliance in Nigeria. Most importantly, tax authorities must come to reality by including sociodemographic factors as part of their tax drive strategies. Further discussions of the study’s theoretical and practical implications are discussed.

Taxes are levied in almost every country, primarily to raise revenue for government expenditures. Tax compliance issue is a major problem in revenue generation by the government in Nepal. This study therefore aims to examine the impact of tax knowledge and awareness, detection and punishment, tax system and implementation, attitudes towards tax, tax rewards and incentives, and tax policy on tax compliance behavior of small-sized enterprises of Pokhara Valley. The study is based on descriptive and analytical research design with a quantitative nature of data. Required data were collected through primary sources by using a self-administered questionnaire, coded, and analyzed by employing both descriptive and inferential statistics namely mean, standard deviation, Pearson’s correlation, and multiple linear regression models side by side 50 samples were selected along with a convenience sampling design. The study result confirms that the variables including tax knowledge and awareness, tax system and implementation, detection and punishment, and tax policy display low positive relationships with tax compliance behaviour but attitudes toward tax show a negative correlation. Besides this, the relationship between tax rewards and incentives and tax compliance behaviour is moderate. Additionally, all the explanatory variables have an insignificant impact on the tax compliance of the small-sized businesses of Pokhara Valley. It is anticipated that this study will offer significant new information and comprehension to academics, practitioners, policymakers, and other regulatory bodies involved in the creation of tax policies.

Background: Scholars have devoted more time to the concept of tax compliance behaviour in recent years. Insufficient tax revenue collection is one effect of low tax compliance behaviour. The problem of low tax compliance behaviour is universal. If not addressed, emerging and fastest-growing economies with vastly commanding tax authorities will have insufficient tax revenue to finance their budgets. Objective: This study sought to divulge the critical factors for tax compliance behaviour. Transforming the ways of tax collection into a digital era is central to easy tax compliance. To meet this objective, this study linked the electronic tax system employing the Importance Performance Map Matrix (IPMM), a crucial matrix to determine the importance and performance of the constructs to explain tax compliance behaviour. Method: This study adopted the survey method. Information on variables under investigation was collected from business centres. A stratified random sampling was employed to obtain the taxpayers who use the e-tax system. The study analyzed data using Structural Equation Modelling (SEM) using SmartPLS3. Results: Unveiled that behavioural intention is a critical factor in enhancing the behaviour of taxpayers to comply. Additionally, performance expectancy highly influences taxpayers to comply. When taxpayers have high expectations of productivity and return on the e-tax system they use, it drives more intention to voluntary tax compliance. Conclusion: Tax authorities are argued to introduce or design e-tax systems that improve taxpayers’ businesses and increase government tax revenue. Keywords: Behavioural Intention; Tax Compliance Behaviour; Importance Performance Map Matrix.

Background: A conceptual framework to assess the particular tax situation of small business owners identifies three key aspects that distinguish small business owners’ perceptions of their tax obligation. These aspects are: they are likely to perceive more opportunities not to comply than employed taxpayers; they are likely to lack meaningful taxation knowledge and they are likely to frame the paying of taxes as a loss.Aim: The aim of this article was to sketch a tax compliance risk profile of guest house owners in Soweto to suggest strategies to negate those factors that may negatively influence their compliance behaviour.Setting: Tax compliance is a priority for tax administrations, especially in developing countries such as South Africa where small businesses are a high compliance risk group. Small guest houses’ income is usually variable and/or cash-based and not easily verifiable against third-party data, which creates a high risk of non-compliance.Methods: A mixed methods research approach was followed. Empirical evidence in the form of semi-structured questionnaires administered face-to-face with 23 guest house owners in Soweto was statistically and thematically analysed to compile a profile of the tax compliance risk according to the framework for tax compliance behaviour of small business owners.Results: Factors such as age, gender and tax morale show favourable results for tax compliant behaviour. However, perceptions of fairness, perceived opportunity for non-compliance, knowledge deficits, decision frames, industry, business size and social norms embrace a high risk of non-compliance for this population.Conclusion: Information pointing out the factors that could negatively influence tax compliance behaviour in this population was obtained. Strategies for empowering small business owners to comply voluntarily with their tax obligations are suggested and include, for example, taxpayer education and improved communication efforts from the revenue authority.

PurposeThis study aims to analyze the tax compliance behavior of family firms by integrating social and psychological norms with legitimacy determinants, focusing specifically on the Moroccan context.Design/methodology/approachEmploying a qualitative research design, the study conducted semi-structured interviews with 30 chief executive officers (CEOs) of Moroccan family firms. The data were analyzed using thematic analysis to unravel the interplay between individual beliefs and societal norms.FindingsThe findings reveal a complex interplay between the personal norms of CEOs and chief financial officers (CFOs) and wider societal and cultural expectations, significantly influencing tax compliance behavior. The study identifies the multifaceted nature of tax compliance, which is shaped by personal ethics, family values and the dominant societal tax culture.Research limitations/implicationsThe research is limited by its qualitative approach and focus on Moroccan family businesses, which may not be generalizable to other contexts. Future studies could use a quantitative approach and expand to other geographical settings for a more comprehensive understanding.Practical implicationsInsights from the study can assist policymakers and tax authorities in developing culturally sensitive tax compliance strategies that resonate with family business values.Social implicationsThe research underscores the importance of considering sociocultural dimensions in tax compliance, fostering a more cooperative relationship between family businesses and tax authorities.Originality/valueThe study contributes a novel perspective by synthesizing social, psychological and legitimacy factors in understanding tax compliance in the unique context of family businesses.

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.

This study highlights the role of Mental Tax Accounting in shaping tax compliance in Indonesia, where national revenue largely depends on tax collection. The main issue addressed is the low level of tax compliance, which is not only caused by economic factors but also influenced by psychological aspects, such as how taxpayers mentally process tax-related information. This study aims to develop a Mental Tax Accounting framework by integrating the concepts of mental accounting, cognitive biases, and social factors within the taxation context. This study uses a systematic literature review of 25 selected studies from the Scopus, Web of Science, and Google Scholar databases. The findings identified eight key indicators: (1) mental tax categorisation, (2) cognitive biases, (3) fairness perception, (4) decision heuristics, (5) loss aversion, (6) mental framing, (7) emotional factors, and (8) social influence. The results indicate that behavioral economics-based interventions, such as tax communication redesign, system simplification, and the use of social norms, can serve as additional indicators for tax compliance compared to conventional approaches. Keywords: behavioral economics, tax policy, tax compliance, mental tax accounting, fiscal psychology

This paper discusses current developments in tax compliance research, with a focus on three aspects. First, we summarize empirical evidence on the traditional deterrence or enforcement approach, suggesting that tax audits and fines for noncompliance are critical in taxpayers’ compliance decisions. However, recent research indicates that the effects of deterrence are more nuanced than initially thought, suggesting that other interventions are needed to improve tax compliance. Second, therefore, we discuss research on behavioral approaches to increase tax compliance, starting with research that analyzes the effects of “nudges”, or interventions that use behavioral economics to alter the ways in which the choice architecture facing individuals is communicated to them by the tax administration. As applied to tax compliance, we conclude that nudges have had mixed effects on increasing tax compliance, suggesting that the specific design and implementation of these interventions determine their effectiveness. Third, we extend our discussion to other behavioral economics interventions that have not yet been studied widely in tax compliance research. These include “sludge”, or institutional features that complicate compliance, and “boosts”, or initiatives that target individuals’ competencies and thereby help them to make better decisions. Our central argument is that all three of these behavioral interventions should be utilized in the design of tax policies. However, for these methods to effectively complement traditional deterrence approaches, tax administrations should evaluate them before implementing them in the field. Closer cooperation between administrators and academics should thus be facilitated and encouraged.

This article appeared in the December 31, 2007 Annual Report to Congress of the National Taxpayer Advocate, which commissioned this research. Why do people follow the law? The answer, under the traditional theory of compliance, is fear of detection and punishment. The deterrence model, however, accounts for only a minor portion of actual compliance levels. It has such poor explanatory power because it assumes that the decision to comply is based solely on a rational cost-benefit analysis in which people weigh the benefits of non-compliance against the costs of detection and penalties. Recent literature reveals, however, that the decision to comply is not purely rational. Rather, personal values, social norms, and non-rational cognitive processes also strongly affect the decision. What holds true for law in general holds true for tax compliance specifically. Traditional methods of enforcement through audit and penalties explain only a small fraction of voluntary tax compliance. Theorists and researchers attribute the vast majority of compliance to what they loosely describe as internal motivations or “tax morale.” The field is still young, the subject complex, and some of the empirical data is inconclusive. Nevertheless, the literature clearly indicates that tax morale plays a major role in tax compliance.Although neither the exact components of tax morale nor the precise mechanisms by which they work have yet been fully delineated the literature has identified certain elements. Research shows that tax compliance is affected by (social and personal) norms such as those regarding procedural justice, trust, belief in the legitimacy of the government, reciprocity, altruism, and identification with the group. Cognitive processes, such as prospect theory, also influence an individual’s reaction to tax issues. Studies also indicate that certain demographic factors such as age, gender and education correlate with the tax morale.The components of tax morale, like internal motivators in other areas of the law, are not static. They interact with each other and the environment and are influenced by each individual’s own cognitive framework. Consequently, an external agent, such as the IRS, can influence tax morale norms and thereby tax compliance. It can activate compliance norms in a variety of ways including education, properly framing communications, fair procedures, and a regulatory framework that incorporates current and future findings of tax morale research into its operations and dealings with taxpayers.The Report makes three major recommendations. First, the IRS should establish a department devoted solely to exploring tax morale issues and implementing the findings. Second, the IRS should adopt a tax morale approach to tax compliance that recognizes the importance of taxpayers’ internal motivations and the effects on these motivations of societal conditions and institutions (such as the IRS) that interact with them. Third, using behavioral science research, the IRS should implement ongoing educational (long term and short term) programs and media campaigns. Since the subject of this Report is tax compliance of individual taxpayers, both the literature review and the recommendations focus on individuals. Both the tax morale concept and this Report, however, are relevant for all taxpayers.

Tax compliance behavior has been researched at different times in various parts of the world using various theories. This research has focused on the psychological aspects of tax compliance behavior by applying the theory of planned behavior (TPB) proposed by Ajzen. 300 taxpayers were studied using a questionnaire based on Likert scale, and the results were analyzed using structural equation modelling. Results found from SEM approach indicate that subjective norm has a significant influence on tax compliance behavior while intention mediates it and moderated by religion. Attitude and perceived behavioral control were found to have a significant influence on intention. Individual taxpayers are selected from the capital, and thus findings derived from the sample might not be generalizable for all individual taxpayers in Bangladesh. The results of this study might provide some insight to the tax non-compliance problem in Bangladesh and help authorities to design strategies to motivate taxpayers to comply with existing fiscal policies. Tax compliance issues have been explored from various perspectives in Bangladesh. Lack of significant influence on subjective norm toward taxpayer intention indicates that social and peer is yet to make a substantial contribution to improving tax compliance. This study has introduced structural equation modelling technique to explore the moderating influence of religion on individual taxpayers in the context of Bangladesh.