Understanding Tax Compliance among Sole Proprietors: A Theory of Planned Behaviour Analysis

Abstract

Issues related to tax compliance represent a significant challenge for tax administrations worldwide. Addressing these concerns is crucial, as non-compliance can lead to substantial losses in government revenue. Drawing on the Theory of Planned Behavior (TPB) as the foundational theoretical framework, this study investigates the determinants of compliance behavior among sole proprietors. Questionnaires were sent to a sample of sole proprietors in Malaysia and were completed by 225 respondents. The results showed that the TPB variables were able to explain 44.7 percent variance in behavioural intention to comply with the tax laws. The sole proprietors' intention to comply with tax regulations was significantly influenced by their attitude toward compliance and their perceived behavioral control. However, it was observed that subjective norms do not exert any influence on the decision of whether to comply with tax laws or not. The findings imply that tax authorities should prioritize addressing attitudes, as favourable attitudes toward the tax system appear to be a key driver of increased tax compliance among sole proprietors. By fostering positive perceptions and attitudes regarding the tax system, tax authorities may enhance overall compliance levels within this specific taxpayer group. In conclusion, this study contributes to the existing body of tax literature and offers initial insights for Malaysian tax policy makers seeking to comprehend the determinants of behavioral intentions regarding tax compliance