Abstract
Tax is the main source of government revenue. However, a number of countries worldwide are increasingly besieged by challenges regarding compliance levels with the rules of tax systems. Thus, this paper aims to enhance an understanding of tax non-compliance behaviour by investigating the effect of the income tax system structure on Yemeni taxpayers’ behaviour. The study focuses on income tax compliance behaviour of owner-managers of small and medium enterprises (SMEs), as the Yemeni economy relies heavily on this sector. The SME sector represents 99.6 percent of business in Yemen. Based on a quantitative approach using a self-administered survey instrument, a total of 330 valid questionnaires were collected and the feedback provided analyzed. The results demonstrate that SME taxpayers exhibited a high level of tax non-compliance. Furthermore, the multiple regression analysis shows that the tax rate had a positive and significant influence on tax non-compliance behaviour, but the tax penalties rate did not. These results can be especially relevant to policymakers and practitioners of tax systems structures, particularly in a developing country such as Yemen.
Highlights
Tax non-compliance has become a serious impediment that affects the global economy and there has been widespread growing interest among tax researchers (Ross & McGee, 2012)
The tax system structure was explained in the current study through two variables, namely the tax rate and penalties
The analysis revealed that the adjusted R2 was 0.069, which meant that the tax system structure could explain on 6.9 percent of the Dependent variable: Tax non-compliance
Summary
Tax non-compliance has become a serious impediment that affects the global economy and there has been widespread growing interest among tax researchers (Ross & McGee, 2012). Mas’ud et al (2014) argued that levels of tax non-compliance in developing communities were much greater than developed ones. Previous research has vigorously investigated the issue of tax non-compliance, covering various countries in Europe, Asia, North America, South America, New Zealand and Australia (Gaventa & McGee, 2010; McGee et al, 2009a; McGee et al, 2009b; McGee, 2007; McGee, 2006). The Middle East region was certainly not immune to such a perplexing challenge of tax non-compliance (Central Organization for Control and Audit COCA, 2018) – the Middle East has become a vital region that contributes significantly to the growth of the global economy (Carapico, 1998) – studies into this issue were very rare (Aljaaidi et al, 2011). The present research has sought to scrutinize tax noncompliance in Yemen, one of the struggling economies of the Middle East
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