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The economic approach to law

My paper examines often neglected tax compliance determinant factors, which are the behavioural and the cultural ones. Ignoring some of these factors, could lead to a misperception of the taxpayer, who, if not treated right, will change his future behaviour, according to the strategies adopted by tax authorities.In order to achieve performance, tax authorities need strategies adapted to the taxpayers they manage. They go through a process of risk management, identifying the principal risks, but often overlook the human dimension of taxing, the humans who make mistakes, both intentional and unintentional. Because of that, tax performance remains a more theoretical concept, with limited applicability, without knowing the taxpayer it addresses. Tax issues are complex, and the manner to address them must be refined.

Economic And Behavioural Determinants Of Tax Compliance

Despite the fact that tax is an important stream of revenue for government of any country, there is tax avoidance and tax evasion which are constraints serving as a bottlenecks for efficient tax collection performance. Therefore, this study examines tax compliance and its determinants in Kaffa, Bench Maji and Sheka Zones category ‘B’ business income tax payers, Ethiopia. To do this, data was collected with the aid of structured questionnaires, administered to 311 respondents using proportionate simple random sampling procedure. The data was examined with the use of descriptive statistics and econometric model particularly ordered logit model. The result of ordered logistic regression showed that, among different variables tested, tax compliance was positively affected by education level of tax payers, tax knowledge and awareness of tax payers, simplicity of the tax system, attitude of tax payers towards tax, perceived role of government expenditure, and rewarding scheme for loyal tax payers. It is therefore recommended that the tax authority ought to conduct effective and sustainable awareness creation programmes and tax education to the general public in general and to tax payers in particular through printed and electronic medias and face-to-face cessions. The tax authority should also simplify the tax system particularly the tax return, tax forms and tax laws so that they become easily and clearly understandable to tax payers. Moreover, the government should consider provisions of trophy in terms of tax rewards and inducements to honest and dedicated tax payers. Lastly, the government shall maintain accountability and transparency on how the revenue collected from taxation was being disbursed and provide social services efficiently and effectively to the society so that tax payers will have trust and positive attitude towards the tax that they pay and b the tax system. DOI: 10.32602/jafas.2019

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Analysis of tax compliance and its determinants : evidence from Kaffa, Bench Maji and Sheka zones category B tax payers, SNNPR, Ethiopia

A General Theory of Tax Structure Change During Economic Development.

One of the most interesting results in the tax evasion literature is that an increase in the income tax rate would increase tax compliance. Despite its peculiarity, this result has gained acceptance as a cornerstone for further developments of the rational tax evasion model and its application to policy design. However, because of the mathematical format by which it is conveyed, this counter-intuitive result has remained inaccessible to undergraduate students as well as to non-economists, be they academicians in related disciplines, tax administrators, or policy makers. The purpose of the present paper is, first, to introduce the rational tax evasion model in a nonmathematical style that is accessible to any reader. Second, show that the behavioral predictions of the rational tax evasion model can easily be obtained using a simple graphical representation of the optimum condition that involves the derivation of a demand curve for tax compliance.

https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=980096

The Tax Compliance Demand Curve: A Diagrammatical Approach to Income Tax Evasion

Tax evasion represents one of the major problems facing transition and developing economies. It imposes several economic costs: it slows down economic growth; it diverts resources to unproductive activities; it provides an incentive for firms to remain small and invisible; and it generates inequity between the evaders and the honest taxpayers.
The aim of this thesis is to investigate the determinants of business tax evasion for transition economies. We do so by adapting the individual theory to the case of businesses; that is by assuming that the behaviour of businesses is similar to the behaviour of individuals, and that the determinants of business tax evasion may be similar, at least qualitatively, to the determinants of tax evasion by individuals or households. More specifically, beyond theoretical and empirical review of the tax evasion literature, this thesis provides three related empirical investigations: a panel investigation of tax evasion at the country level; a pooled-cross section investigation of firm-level behaviour across the transition economies and a cross-section investigation of business tax evasion and tax morale in Kosovo. For the firm-level investigation we use the BEEPS data for the years 1999, 2002 and 2005; and, for the investigation of business tax evasion in Kosovo, we generate primary data by developing a questionnaire and conducting a survey of businesses in Kosovo. Our econometric findings suggest that, first, regardless of the theoretical and previous empirical ambiguity, when it comes to transition economies the relationship between tax rate and tax evasion is positive; second, the macroeconomic environment has only minor effects on business tax evasion, suggesting that the decision to evade or not must depend on other non-economic factors; third, even if a country is performing well in general economic terms, the presence of negative institutional phenomena exert a dominant and immediate influence on the relationship between businesses and government; fourth, business tax morale, as is the case with individuals, has a strong and negative relationship with tax evasion; fifth, moreover, given that the same considerations on morality apply to both individuals and businesses, policies in the individual context apply also to businesses; sixth, lower corruption, higher trust and better treatment of business taxpayers improves significantly both tax morale and tax compliance; and, seventh, because levels of tax evasion vary across firm characteristics, audit strategies should be set accordingly. Finally this thesis provides a set of corresponding policy recommendations intended to reduce either the possibility and/or the inclination to evade.

Lumir Abdixhiku

Papers

Determinants of business tax evasion in transition economies