Mediating role of trust in the relationship between public governance quality and tax compliance

Yusuf Mohammed Alkali,Almustapha A Aliyu,Abdulsalam Masud

doi:10.36096/brss.v3i4.276

Yusuf Mohammed Alkali, Almustapha A Aliyu + Show 1 more

Open Access

https://doi.org/10.36096/brss.v3i4.276

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Abstract

This paper examined the mediating role of trust in government on the influence of public governance quality indicators (accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption) on tax compliance in Africa. Cross-country data obtained from 38 African countries for 2015 was used and analyzed using Ordinary Least Squares (OLS) regression analysis. The study found that accountability, political stability, control of corruption, and trust have a significant influence on tax compliance among the sampled African countries, but government effectiveness, regulatory quality, and the rule of law and have insignificant influence on tax compliance. The result of the mediating effects revealed that trust mediates the influence of accountability and political stability on tax compliance in Africa. However, it failed to mediate the influence of government effectiveness, regulatory quality, rule of law, and control of corruption on tax compliance among sample African countries. The study offers theoretical insights on the role of trust as a mediator on social exchange relationships from the context of public governance quality on tax compliance. It also implies to the policymakers that building trust is an important mechanism through which the impact of public governance on tax compliance would be more pronounced. The study further calls for replication of its findings in other continents such as the Americas, Asia, and Europe.

Highlights

For about a decade, literature documents that public governance quality variables have been consistently influencing tax compliance (Alabede, et al, 2012; Torgler, Schaffner, & Macintyre, 2007; Torgler & Schneider, 2009)
The theory highlights that the influence of public governance quality on tax compliance could be explained by social exchange relationship that subsists between governments and citizens
The study examined the mediating role of trust on the relationship between public governance quality variables and tax compliance

Summary

Introduction

Literature documents that public governance quality variables (accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption) have been consistently influencing tax compliance (Alabede, et al, 2012; Torgler, Schaffner, & Macintyre, 2007; Torgler & Schneider, 2009). The extant global literature within the continuum of taxation (Alabede, et al, 2012; Torgler, Schaffner, & Macintyre, 2007; Torgler & Schneider, 2009) is yet to explore through empirical evidence the mediating effect of trust in the relationship between public governance quality and tax compliance despite the theoretical insights from Social Exchange Theory of Emerson (1976). These gaps within the literature motivate the current study. The fourth and the fifth sections are results and conclusion respectively

Literature Review

Political stability influences tax compliance in Africa

Results and Discussions

Conclusion