Tax Awareness and Compliance: An Empirical Study on Small and Medium-Sized Enterprises (SMES)

Abstract

The issue of tax compliance has been explored over many years from different perspectives. These studies have investigated determinants of tax compliance and assumed that those are direct relationships. This study aims to analyze the determinants of tax awareness. The study adds a new variable namely appreciation strategy on the determinants. It also investigates the relationship between tax awareness and tax compliance. Based on the survey from 150 small and medium-sized enterprises, empirical findings confirm the prevalence of the behavior control and subjective norm dimensions as determinants of tax awareness. Interestingly, the result also endorses the validity of the appreciation strategy in tax awareness behavior. This study contributes to the current literature by adding a new variable of the appreciation strategy in the tax compliance model. The research model also suggests the indirect influence of the current determinants of tax compliance, but tax awareness can be an intervening variable of the prevalent determinants.