Tax Technology, Fairness Perception and Tax Compliance among Individual Taxpayers

Abstract

International Center for Tax and Development estimated that majority of the countries collect 80% of total revenue from taxation. However, most of the developing countries including Pakistan face difficulty in taxation compliance. In Pakistan, taxation system faces a major barrier to compliance in terms of trust deficit among citizens regarding tax authorities. The current study attempted to assess the influence of tax technology on taxation compliance and how it helps to formulate fairness perception about the taxation system. It employed Technology Acceptance model (TAM) to extract the variables of the study according to the local setting of Pakistan. The population of the study consisted of individual tax filers including two segments of the society, that is, salaried individuals and self-employed individuals. Snowball sampling technique was used to collect the data by using a self-administered questionnaire. The selected sample generated 169 complete and useable observations/responses. The data was analyzed by Structural Equation Modeling (SEM) through Smart PLS. The findings indicated a significant direct influence of perceived usefulness, perceived ease of use, and facilitating conditions on tax compliance. Moreover, fairness perception showed a significant positive influence on tax compliance, supported by fairness heuristic theory. The perceived tax fairness significantly mediates the association of the perceived ease of use and facilitating conditions with tax compliance. However, this mediation was not found in the relationship between perceived usefulness and tax compliance. This study could help tax administrators to cope with the issue of trust deficit among tax files and state authorities.