Knowledge requirements, tax complexity, compliance costs and tax compliance in Uganda

Abstract

The purpose of this study is to examine the relationship between knowledge requirements, complexity of the tax system and tax compliance in Uganda while exploring the indirect effects of compliance costs. The research design was cross sectional and correlational using VAT registered withholding agents. This study results suggest that knowledge requirements do not have a significant relationship with compliance costs. Knowledge requirements are best suited in explaining the internal costs of compliance than external costs. Our results indicated that taxpayers have sufficient tax knowledge to enable them comply with taxes but that does not rule out the fact that taxpayers still incur the cost of complying. When the system of taxation becomes more complex, then the cost of complying also becomes high. The complex tax systems require taxpayers to obtain extra training as well as seeking external professional advice in order to comply. Therefore, that tax complexity has a direct and indirect impact (through compliance costs) on tax compliance. Rather than focusing only on the importance of the normal analytical deliberation of knowledge requirements and tax complexity by taxpayers in influencing their tax compliance, the current paper shows that in addition, the indirect effect of compliance costs in establishing the basis for understanding taxpayers' compliance. Methodologically, this study solicits responses from taxpayers who are deemed to be tax compliant and have been ABOUT THE AUTHOR

Assessing SMEs tax non-compliance behaviour in Sub-Saharan Africa (SSA): An insight from Nigeria

“…The results show that higher complexity surrounding tax law, difficulties in income tax return preparation, ambiguity and clarity problems are bound to increase tax non-compliance behaviour (the greater the tax system complexity the more likely tax non-compliance behaviour). There is a similarity between the views expressed in the extant literature and the current study results (Kirchler, 2007;Musimenta, 2020;Sapiei et al, 2014;Wartick, M. & Mark, 1992) Hypothesis 1 c (H 1c ) results show that tax rate is statistically insignificant considering a p-value greater than 10% level (p > 0.10) with an insignificant coefficient (β = 0.092) showing a positive relationship. The coefficient has the right sign but statistically insignificant to influence tax noncompliance behaviour.…”

“…The study has valuable contributions that can help reshape the tax policy of the country, reduce tax leakages, enhance tax compliance and shore up the nation's non-oil revenue as explained under the study conclusion section. The findings also support behavioural economics theory that is often referenced as the theoretical framework for studies in tax morale, tax evasion and tax compliance behaviour (Musimenta, 2020;Nurkholis et al 2020;Christensen et al, 1994;Wartick, M. & Mark, 1992;Elffers et al, 1992;Lewis, 1982;Warneryd & Walerud, 1982;Yitzhaki, 1974;Allingham & Sandmo, 1972). The study will be of immense contribution to literature, more so, most contributions so far from Nigeria are fraught with methodological and generalisation shortcomings, hence, the importance of this study.…”

“…Wartick, M. and Mark (1992) opined that the tax rate, the probability of detection and the penalty structure are determinants of the monetary cost of tax compliance; these conversely determine tax compliance behaviour (Wartick, M. & Mark, 1992). Several similar empirical studies in different countries subsequently tested hypotheses based on these factors (Chan et al, 2000;Devos, 2008;Hindriks et al, 1999;Musimenta, 2020;Sapiei et al, 2014: Ya'u et al, 2020 and results confirmed the influences of these factors as significant determinants of tax compliance behaviour. Tran-Nam and Evans (2014) defined tax complexity from different perspectives.…”

“…The deterrence theory focuses on the sanction threat and sanction effect, the punishment or sanction determined by taxpayer compliance behaviour. The more the severity of sanction and probability of detection, the lower the tax non-compliance tendencies (Musimenta, 2020;Sapiei et al, 2014). The economic approach has been expanded to include all factors that put a taxpayer in a position of economic advantage or disadvantage.…”

“…In general, tax complexity may be procedural complexity, computational complexity, low level of readability, compliance complexity, form complexity and rule complexity (Pau et al, 2007;Saad, 2014;Saw & Sawyer, 2010). The complexity in a tax system primarily arises from a lack of understanding by laypersons that constitute the bulky of the taxpayers (Kirchler, 2007;Musimenta, 2020). A weak tax deterrence sanction breeds corruption.…”