What is in it for me? The potential for managerial benefits to improve tax compliance

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Faridy, Nahida
Freudenberg, Brett
Sarker, Tapan
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2018
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Abstract

A value-added tax (VAT) may induce businesses to make a clear decision as to operating outside the formal economy, with the VAT seen as a real cost. It is suggested that small and medium enterprises (SMEs) are more likely to contribute to the cash economy, so it is important to have a greater understanding of the factors that may make SMEs more tax compliant, especially with VAT. Potential motivators for complying with a VAT are the managerial benefits that arise from keeping tax records. This article reports the findings from a survey of 240 SMEs in a developing country, with the findings suggesting that for non-compliant taxpayers, being aware of the potential managerial benefits from complying with VAT appears to be more persuasive than the imposition of penalties. In this way, compliance may be improved if taxpayers see “what’s in it for me” in terms of complying with a country’s VAT system.

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Australian Tax Forum
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33
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2
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© The Author(s) 2018. This is the author-manuscript version of this paper. It is posted here with permission of the copyright owner(s) for your personal use only. No further distribution permitted. For information about this journal please refer to the journal’s website or contact the author(s).
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Accounting, auditing and accountability
Taxation law
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