Economic Deterrence Research Articles

Determinants and Extent of Tax Compliance among SMEs in Arusha City Council, Tanzania

Taxes have been a nourishing commodity in generating revenues liable for financing governments’ budgets all over the world. This being the fact, this study examined the determinants and extent of tax compliance in SMEs in Arusha City Council which was the specific objective of this study. This was a cross-sectional study which employed a double Hurdle regression model to analyze primary data collected from a sample of 100 SMEs’ owners obtained by simple random sampling to represent the entire population of SMEs owners via questionnaire and analyzed with STATA software version 17. Using the economic deterrence theory to guide the analysis of this study, the analysis found that Male entrepreneurs dominate the SME sector, SME owners understand tax regulations and undergo frequent tax audits. Further, the findings revealed that privately owned SMEs, primarily ran by persons in their mid-30s are flexible with an average workforce of nine employees. Furthermore, SMEs were found to generate feasible profits and fulfill tax compulsions by paying an average tax rate. Moreover, the double hurdle regression model shown that age and profits have negative effect on tax payments, and higher household size of SMEs owners are associated with higher tax payments. Additionally, publicly owned enterprises positively comply with tax. Therefore, given these findings, this study recommends to policymakers to streamline tax procedures and develop a platform to discuss tax rates with tax payers before implementing the planned tax obligations.

Factors Influencing Income Tax Compliance Decisions: A Review of the Literature

The payment of income tax to the state by its citizens who have an income that is liable to tax is a mandatory legal requirement. In every country in the world, however, there exists a phenomenon known as a tax gap; i.e., not all of the people who are supposed to pay tax on their income are doing so. Why some pay taxes while others decide not to comply with the mandatory legal requirements to do so remains a question that has not yet been answered in full. Income tax is multidisciplinary in nature: economics, psychology, law, accounting, political economy, sociology, public sector management, etc; all come into play to explain why some people pay their taxes while others decide not to. The economic approach attempts to understand tax compliance from the perspective of the tax gap, while the psychological approach is based on exploring the citizens’ voluntary willingness to act not only withing the letter of the income tax law but also within its spirit. This paper attempts to provide an overview of the current ‘Tax Compliance’ literature, from the neo-classical economic deterrence models to the behavioural economics models and demonstrate the limitations of the tax compliance literature from the perspective of developing countries.

Digitalization, Culture, and Taxpayers’ Compliance in Nigeria

This study investigated digitalization, culture, and taxpayers' compliance in Nigeria as the literature shows a paucity of studies on the subject. The study was guided by the economic deterrence theory and benefits theory of taxation (BRTT). Descriptive survey research was adopted. The study population comprised of selected staff at the Federal Inland Revenue Service (FIRS) offices, in Ibadan. three hundred and eighty-four (384) respondents were drawn using the Taro Yamane formula. A selfconstructed questionnaire was administered to the respondents (r=0.821). Data collected were analyzed using descriptive and inferential statistics. Results showed that tax digitization (x=2.98), tax culture (x=2.93), and tax compliance (x=3.05) are good. Results also showed a significant influence of tax digitalization and tax culture on taxpayers’ compliance (F=22.551, p < 0.05). Tax digitization (Beta = .095; t = 1.798) has a positive influence on taxpayer's compliance, while tax culture (Beta = -0.344; t = -6.546), has a negative influence on taxpayer's compliance. The study recommend that the government should consider adopting a tax policy that would facilitate tax digitalization, tax education, sensitization to promote tax culture, and the inclusion of e-transactions taxation in the tax laws.

Justice, power and voluntary tax compliance: a moderation analysis among taxpayers in Addis Ababa, Ethiopia

PurposeThe aim of this study was to examine the moderating roles of the legitimate power and distributive justice of the tax authority on the effect of procedural justice on the voluntary tax compliance of taxpayers in Addis Ababa, the capital of Ethiopia, by using survey data collected from taxpayers in the city.Design/methodology/approachData for the study were collected from 800 sample taxpayers who were drawn by using a systematic sampling technique. The variables of the study were constructed as indices from composing the scale items developed and tested for their validity by prior researchers. Having collected the data by using a 7-point Likert scale questionnaire and forming the latent variables, hierarchical multiple regressions were applied to determine the moderating effects of the two variables (i.e. legitimate power and distributive justice) on the effect of procedural justice on voluntary tax compliance.FindingsThe author found that both the legitimate power of the tax authority and distributive justice of the authority moderate the effect of procedural justice on voluntary tax compliance. The moderating roles of the two variables appear to be opposite in that low (but not high) distributive justice and high (but not low) legitimate power of the tax authority stimulate the effect of procedural justice on voluntary tax compliance.Research limitations/implicationsThe first limitation is that the data used in this study are self-reported data while the subject of the study is sensitive subject about which respondents are not believed to provide genuine responses. This is presumably because taxpayers are less likely to confess their tax evasion as they fear legal actions following their self-report. Hence, other controlled methods such as the experimental design are recommended to replicate the results of this study. The second limitation is that data for the study were gathered through a one-time cross-sectional survey and hence it would not warrant a causal claim between the study variables. Consequently, other research with a longitudinal or experimental design might warrant a causal relationship between the variables.Practical implicationsTherefore, the tax authorities must endeavor to attain high legitimacy by doing “the right things” as perceived by the taxpayers so that their tax-related decisions gain acceptance from the decision recipients. Tax policy makers as well ought to consider the importance of and the relationship between procedural justice, distributive justice and legitimate power of the tax authority in order to attain the maximum possible voluntary compliance of taxpayers that significantly reduces the administrative cost of taxes.Social implicationsThe study benefits society by enhancing tax compliance and hence helping the government secure a better amount of tax revenue and provide better public goods and services.Originality/valueThe findings of this study are of high theoretical and policy significance. Theoretically, the findings contribute to the integrative literature on economic deterrence and social-psychological factors that are responsible for voluntary tax compliance decisions. The parallel moderating roles of the two variables on the relationship between procedural justice and voluntary cooperation in a single model and in the tax compliance context are novel. In terms of applicability to policy formulations, they shed light on the need for a shift from a pure focus on aggressive tax audits and penalties, especially in emerging economies to a combination of the tax audits and the nurturing of the voluntary deference of taxpayers to the tax authority's decisions. Caution must, however, be taken that the results of this study may not be applicable to tax environments in other countries.

УПРАВЛІННЯ ЗМІНАМИ В САНКЦІЙНІЙ ПОЛІТИЦІ ПРОТИ РОСІЇ: ДОСВІД УКРАЇНИ

Purpose. The article is devoted to the study of the problems of sanctions policy formation and assessment of the effectiveness of existing sanctions against russia. Design/methodology/approach. Semantic analysis, comparative analysis and the method of systematisation were used to assess the effectiveness of sanctions; the method of grouping, structural and logical modelling was used to develop an evolutionary justification for changing Ukraine’s sanctions policy. The abstract and logical method was used to formulate conclusions and theoretically generalise the results of the study. Findings. Sanctions are an effective tool for influencing the behaviour of other states, but their effectiveness depends on many factors, including the type of regime and the characteristics of the country’s economic system against which they are applied. Democratic regimes are more likely to use sanctions. It is determined that the effectiveness of sanctions can depend on many factors, such as the duration of sanctions, the level of support for sanctions by the international community and the economic strength of the state against which they are applied. The sanctions regime against russia is an exception in history, as their number and scope are large, and the sanctions against russia are the most severe and far-reaching measures ever taken. An unprecedented level of cooperation in the area of sanctions has been achieved: Sanctions against russia were imposed by a group of mostly Western allies. It is the first time that such a large and diverse group of countries has agreed to cooperate on sanctions against one country. The EU’s current sanctions response against Russia significantly increases the flexibility and efficiency of preparing, implementing and coordinating sanctions with non-EU countries as well as with non-EU countries. The author argues that instead of establishing a procedure in which different decision-making paths are chosen depending on the importance of the target, the current experience of sanctions against Russia can set a new standard that will allow future sanctions efforts to benefit from the speed, commitment and unprecedented level of coordination dedicated to the fight against the invasion of Ukraine. The analysis of the effect of sanctions against Russia in 2022 has led to the conclusion that the expectations of the international community and the hopes of the Ukrainian people regarding the powerful impact and consequences of sanctions were overstated and unjustified. Practical implications. The conclusions and justifications made can be used to develop recommendations for strengthening sanctions pressure against Russia and for developing the theoretical framework for the formation of sanctions policy against aggressor countries. Originality/value. Based on the study of the peculiarities of sanctions policy formation, the author identifies the evolution of approaches to the current system of sanctions against Russia, substantiates the change of goals and integration of world institutions in strengthening economic deterrence against the aggressor country. A comparative analysis of the main economic indicators of the development of the world’s largest countries is carried out, the ineffectiveness of the system of sanctions against Russia is proved, and the main factors that caused the ineffectiveness of sanctions are highlighted.

Tax Collection Strategies and Compliance of Residential Rental Income Earners in Kasarani Sub-County, Kenya

Financial freedom is one of the goals economies dream to achieve in both developed and developing nations through taxation. However, non-compliance according to previous literature hindered tax authorities from achieving the set tax collection targets. Drop in National Residential rental income tax collection was reported in the year 2020 by Organization for Economic Cooperation and Development in Kenya. Similarly, the Country’s tax authority data revealed reduction in tax collection for Kasarani Sub County in the year 2020/2021. The key objective of this research was to investigate influence that tax collection strategies have on the compliance of residential rental income earners in Kasarani sub-county in Kenya. The specific objectives aimed at determining the influence of taxpayers trust building, Knowledge & tax awareness, modern technology adoption and effective tax law enforcement strategies on the compliance of residential property owners. The research was anchored on the social exchange, reasoned action, technology acceptance and economic deterrence theories. Descriptive research design was applied to evaluate the influence of independent variables on the dependent ones. A population of 871 property owners was considered with 274 respondents obtained from population target in aid of stratified sample model whereas questionnaires were applied in collecting primary data. Analysis of data was run on multiple regression model supported with descriptive techniques. Validity test together with reliability analysis was done using Analysis of Variance and Cronbach Alpha models. Multicollinearity, normality, heteroscedasticity, and linearity tests were undertaken for diagnostic purpose. Study findings indicated that tax payer’s trust building (t=3.399, p<0.05), knowledge & awareness campaign (t=5.732, p<0.05), modern technology (t=2.897, p<0.05) and effective tax law enforcement strategy (t=4.795, p<0.05) had positive and significant effect on the compliance of Residential Rental Income earners in Kasarani Sub County. The study concluded that mutual trust building aided mobilization of public support for tax collection agenda prompting the initially skeptic residential rental income taxpayers to embrace tax compliance, that tax knowledge & awareness strategy positively affected tax compliance, tax collection and reporting through the modern technology based systems proved to significantly support tax compliance and that the tax law enforcement measure is very strategic in influencing tax income collection. Study recommended use of competitive communication skills as a trust building window in formal and informal interactions between the taxpayer and agency on matters tax compliance. The study recommended the training of taxpayers on use of technology and expansion of its tax labs centers networks close at the Sub County level for easy access.

Effects of Economic Deterrence Theory and Environmental Regulation on Tax Evasion: Evidence from Energy Sector

Environmental regulation is the responsibility of individuals, corporations, and other entities to prevent environmental damage or improve the tarnished environment. The Environmental law of every country works to protect the natural resources of land, water, air, and soil. There are research evidence that environmental regulation influences Corporate taxes. Economic deterrence theory acted as deterrent to threats of punishment for unwanted or illegal behavior. The fundamental concept of the theory is deterring the taxpayers into compliance by the risk of audit, penalty, etc. The objective of the study is to analyze the impact of economic deterrence theory and environmental regulation on corporate tax evasion, particularly petroleum profit taxes in Nigeria. The components of Economic deterrence theory (tax agents, tax complexity, tax knowledge) and environmental regulations are the independent variables and corporate tax evasion particularly PPT is the dependent variable of the study. It is quantitative research based on primary data which was collected from the oil and gas companies’ representatives. Structural Equation Modelling techniques were applied, and the outcome of the research is a positive and significant relationship between tax agents, tax complexity, tax knowledge, and environmental regulations on corporate tax evasion. The result further shows a positive but non-significant relationship between tax audits and perceived petroleum profit tax evasion. The study draws the attention of policymakers to formulate environmental regulations that are more robust, simple, and flexible, to reduce adverse effects of environmental damage on the economic growth and development of oil and gas-producing countries.

Collective Resilience: Deterring China's Weaponization of Economic Interdependence

Abstract Since the 2010s, China has used economic coercion against Western and Asian states to achieve territorial and political goals. China's leveraging of its market is a form of “predatory liberalism” that weaponizes the networks of interdependence created by globalization. The United States and other like-minded partners have mostly used piecemeal “de-risking” measures such as decoupling, supply chain resilience, reshoring, and trade diversion to reduce dependence on China and thereby minimize vulnerability to its economic coercion. But these practices do not stop the Chinese government's economic bullying. “Collective resilience” is a peer competition strategy designed to deter the Xi Jinping regime's economic predation. What informs this strategy is the understanding that interdependence, even asymmetric interdependence, is a two-way street. Original trade data show that the previous and current targets of economic coercion by the Xi Jinping regime export over $46.6 billion worth of goods to China on which it is more than 70 percent dependent as a proportion of its total imports of those goods. These target states could band together in a collective resilience alliance and practice economic deterrence by promising to retaliate against China's high-dependence trade should Beijing act against any one of the alliance members.

Imposition of Tax Penalties and Interest and Its Influence on Tax Compliance of Small and Medium-Sized Enterprises in Nairobi County, Kenya

The purpose of this study was to determine the effect of the imposition of tax penalties and interest on tax compliance of small and medium-sized Enterprises (SMEs) in Nairobi County, Kenya. The economic deterrence theory was used as the theoretical anchor of the study. The population of the study was 195,000 SMEs in Nairobi County, Kenya. The descriptive cross-sectional design was used in the study which focussed on a sample of 399 constituting the managers and owners of SMEs in Nairobi County. Data was gathered using a structured questionnaire that contained closed-ended questions. The collected data was analyzed using descriptive statistics and ordinary least squares regression with the aid of SPSS. The study findings indicated that the imposition of penalties and interest has a positive and significant influence on tax compliance of small and medium enterprises in Nairobi County, Kenya (β = 0.642, t = 10.633, p < 0.05). This, therefore, depicts that the imposition of interest and fines makes SMEs to be more tax compliant. The study findings have implications for tax authorities to improve the effectiveness of the tax penalties system that should complement the self-assessment system. The tax authorities should also ensure that the penalty system is equitable, proportionate, clearly defined, and even-handedly administered to encourage voluntary tax compliance and deter tax offenders. The tax authority should also increase the penalty amount to collect more revenue and make it significant for SMEs that do not comply with tax regulations.

The Impact of Social Identity on Tax Compliance in Indonesia During the Pandemic COVID-19

Purpose: This study aims at examining the impacts of manufacture’s social identity on their tax attitudes, and how these effects on firm’s tax compliance, and used a qualitative method Theoretical framework: Two techniques are distinguished in Devos' (2014) Compliance Theory: the Economic Deterrence Approach and the Psychological Approach. Research by Scott & Grasmick (1998) as cited in Trivedi, Shehata & Lynn (2003) examined that even if economic elements are crucial for evaluating compliance behavior, they are insufficient to fully explain the level of compliance. Design/methodology/approach: The sample of the study are 101 respondents. This study uses quantitative methods to collect, process, and analyze data to draw empirical conclusions. Findings: The data from 101 respondents reported that membership and identity affect their firm’s tax compliance, but not private collective self-esteem and public collective self-esteem. The result shows that dependence on the community and stakeholder views on corporate identity are considered important by companies in order to increase public trust. Meanwhile, private and public collective self-esteem is no longer the key. It implies that the former is more likely to have a higher cost of tax collection to represent tax compliance, which may restrict funds for their public sector and adversely affects its functionality. This is consistent with the previous findings that identity socially impacted tax compliance, instead of self-esteem. Research, Practical & Social implications: Research results for manufacturing managers related to strengthening social identity factors in order to improve overall corporate tax compliance, such as joining tax communities, professional memberships, and the like. By having a clear social identity, managers have channels to discuss tax issues and find solutions to tax problems more easily. Originality/value: The tax compliance issues findings related to self esteem approach having new model for DGT’s to optimize tax income strategy during pandemic.

Determinants of Tax Compliance Behaviour and Sustainable Economic Growth Among MSMEs in Nigeria

This study examined the effects of determinants of tax compliance behaviour on sustainable economic growth of micro, small and medium enterprises (MSMEs) in South-South, Nigeria. The study anchored on the economic deterrence theory and cross sectional survey research design was used on a sample of MSMEs in South-South, Nigeria. The primary data was collected using a questionnaire with a five-point Likert scale and a sample size of 535 using convenience sampling. The data collected were analysed using descriptive statistics, bivariate analysis while multivariate analysis was used in the estimation of the regression model developed for the study. The findings revealed that tax penalty has positive and significant influence on sustainable economic growth among MSMEs in south-south of Nigeria; tax fairness has positive and significant influence on sustainable economic growth among MSMEs in south-south of Nigeria; perceived opportunities of tax evasion has negative and insignificant influence on sustainable economic growth among MSMEs in south-south of Nigeria; tax audit has positive and significant effect on sustainable economic growth among MSMEs in south-south of Nigeria; and tax system has positive and significant influence on sustainable economic growth among MSMEs in south-south of Nigeria. On the basis of the findings, the study concluded that tax determinants such as tax penalty, tax fairness, tax audit, tax system and opportunity for evasion affects the level of sustainable economic growth among micro, small and medium enterprises in South-South Nigeria. The study recommended amongst others that government should expand the tax administration system in Nigeria and strengthen tax collection schemes and follow up procedures on MSMEs. Also frequent tax reforms designed and implemented that would increase revenue generation through tax collection and consequently stimulating sustainable economic growth of Nigeria.

Job performance, knowledge and perceived power of tax officers on tax morale amongst agrochemical traders in Ghana

PurposeThe paper aims to examine agrochemical traders’ tax morale in three Ghanaian regions.Design/methodology/approachPrimary data were collected from 92 respondents using structured questionnaires. A multistage sampling technique was employed and used in selecting respondents.. Descriptive statistics, factor analysis and quantile regression analysis were used to analyse data obtained via the questionnaires.FindingsThe study found tax reporting knowledge, tax calculating knowledge and tax payment knowledge to be the keen factors influencing agrochemical traders’ tax knowledge. It was also revealed that age, religion and marriage positively influence the tax morale of traders. Inversely, gender, high level of education and monthly sales were found to affect tax morale negatively. Moreover, trust (respect, trustworthiness and expertise knowledge) negatively influenced tax morale. Authorities’ tax knowledge and power (sanction and lockdown) were revealed to impact tax morale positively. However, tax morale decreases amongst agrochemical traders with higher tax morale when sanction increases.Originality/valueUnlike previous studies which focussed on tax morale amongst individuals and firms outside the agribusiness sector, this study examined the tax morale within the informal agrochemical trading sector, which has recently attracted colossal patronage due to the high usage of agrochemicals amongst farmers in Africa and Ghana. This study also assumed tax morale to be at different levels; hence the factors that affect the morale at different levels differ. Therefore, the study examined the factors influencing tax morale amongst agrochemical traders by segregating tax morale into quartiles. Relating to theory, the economic deterrence theory was used to ground the study, which is not usually used in most tax morale studies.

Impact of Tax Compliance Enforcement Initiatives in Uganda: case Study of the Value-Added Tax Fraud Campaign

By utilising the economic deterrence theory of tax compliance the study establishes the impact of a VAT fraud campaign on taxpayer behaviour in Uganda. The study employed grouped matching difference-in-differences in regressions. We used monthly time-series data for 563 taxpayers for the period 2017–2018. The data was acquired from the Uganda Revenue Administration (URA) database. The results show that there was a small improvement in compliance behaviour over a timeframe of one year after the implementation of the VAT fraud campaign. Return filing increased by 35 per cent, timeous or on-time filing increased by 5 per cent and non-filing decreased by 3 percent. The policy implications are that the URA should put more effort into improving return filing since this should lead to important behavioural change. In addition, the URA should design specific risk treatment strategies targeting late and non-filing. Lastly, future compliance risk mitigation strategies should be focused on specific sectors where lessons learnt can easily be replicated in respect of different taxpayers within a given sector.

Examining the Tax Administration Law of Ethiopia in Light of the Tax Compliance Theories

The problem of tax non-compliance is a serious global phenomenon, especially in developing and least developed countries. In this regard, states design their tax administration laws and tax compliance rules in light of the two most dominant tax compliance theories: deterrence theory and behavioural theory of tax compliance. These theories are ideals or indexes of a good tax administration system. It is thus important to examine the base or policy of tax compliance rules of the tax administration laws of Ethiopia. This Article examines when and in what forms the tax administration law of Ethiopia is designed to embody the tax compliance theories. Doctrinal research method is used and the major findings show that –like many countries– the tax administration proclamation of Ethiopia is largely designed in consideration of the economic deterrence model to achieve taxpayers’ compliance which depends on audit and penalties when tax is evaded. However, this approach is criticized due to its administrative inefficiency and its inability to build equitable tax system. Aside from tax penalties, tax administration policies and practice in Ethiopia should give much attention to changing individual taxpayers’ attitudes toward the tax system. This requires improving its perceived fairness and equity, making government expenditure in the best interest of the taxpayers, improving procedural justice, tax education, establishing the culture of mutual respect between tax authorities and taxpayers, and making it easy to comply with the tax laws.

Preserving a Liberal International Order: The EU’s Unity and Economic Strength as a Means of Limiting the Corrosive Effects of China’s Sharp Power

This article studies the mechanics through which the EU’s relations with China may harm its values and institutions, providing specific examples that precisely illustrate the Chinese Communist Party’s malign influence in Europe. It also intends to reflect on the extent to which the two distinct political and economic models are compatible with the preservation of a liberal international order. Accordingly, we aim to assess whether the EU has the capacity to counteract China’s sharp power, highlighting concrete policy actions that help strengthen the EU’s position while also identifying persisting shortcomings. It is argued that the EU has considerable economic deterrence to push China into respecting global defined rules and arrangements. Indeed, recent reforms, such as the investment screening mechanism and the global sanctions regime, were an important step towards the affirmation of an EU committed to its values. However, the unanimity requirement in the Common Foreign and Security Policy’s decision-making will likely remain a relevant obstacle for a coherent and efficient EU’s external action.

Social Economic Attributes and Tax Compliance by Individual Taxpayers in Kenya

Tax revenues are crucial financial resources for any economy and plays a key role in economic development. In Kenya tax revenues are the major source of government budgetary resources besides other sources such as grants and loans. The average GDP growth rate in Kenya from FY 2006/17 to FY 2016/17 has been 5.6 percent which is higher than the global GDP growth rate of 2.3 percent. Conversely, Kenya’s tax revenue has not grown at the same pace as the economic growth. Weaknesses in revenue performance have triggered fiscal pressures. Budget deficits have fueled external borrowing amid efforts for the country to capitalize on domestic resource mobilization. Social economic attributes are crucial with regards to tax compliance by individual taxpayers since individual taxpayers have to be aware as well as being sensitive to tax legislation for them to be tax compliant. This study was set out to ascertain effects of taxpayer knowledge, tax complexity and individual taxpayer`s characteristics on tax compliance by individual taxpayers in Kenya. The study further sought to ascertain the moderating effect of tax penalties on relationship between social economic attributes and tax compliance by individual taxpayers in Kenya. The study was anchored on Social Learning Theory, Economic Deterrence Theory and Theory of planned behavior. Cross sectional descriptive research design was adopted in this study. This study targeted the individual taxpayers who were registered with KRA. The study targeted on 4806 staff from five Public Universities in Nairobi City County. Researcher used primary data which was gathered through administering questionnaires to respondents. Data collected was analysed using descriptive statistics and multiple regression. The results postulated that tax knowledge had a significant effect on tax compliance by individual taxpayers in Kenya. The study also found that tax complexity had a significant effect on tax compliance by individual taxpayers in Kenya. In addition, individual taxpayer’s characteristics had a significant effect on tax compliance by individual taxpayers in Kenya. Further, the study found tax penalties had a significant moderating effect on the relationship between social economic attributes and tax compliance by individual taxpayers in Kenya. The study found that the taxpayers sought tax consultants to file their returns. The study moreover found that the taxpayers did not seek updates regarding changes in tax law and regulations and were not conversant with Income Tax Act CAP 470. The study therefore recommends that KRA should educate the public regarding to any changes in tax laws and also ameliorate the readability of the tax laws hence reduce the complexity of the tax law. For KRA to achieve their target compliance level, there is need to have taxpayers understand the reasons why need to pay tax on time. KRA should sensitize the taxpayers on the importance of paying tax via civic education.

Does deterrence-based enforcement matter in alms tax (Zakat) compliance?

PurposeGovernment seeks to realize its economic objectives and eventually its social objectives as well through taxation. In a Muslim-majority economy, besides many types of taxation imposed, some government also legally enforced an alms tax (Zakat) via specific authority. The purpose of this study is to examine the role of enforcement in Zakat compliance and how it can enhance the effect of social motivations, namely perceived institutional credibility and social pressure, on zakat payers' compliance decisions.Design/methodology/approachThis research is underpinned by economic deterrence theory and employed data collected through a cross-sectional approach. A total of 274 Yemeni entrepreneurs responded to the questionnaire and analysed using SmartPLS version 3.2.9.FindingsThe study finds that social pressure and institutional credibility are significantly related to entrepreneurs' compliance with Zakat. Importantly, enforcement-moderated interactions of social pressure and perceived credibility on Zakat payers' compliance are statistically significant.Practical implicationsSome signals emerged from the results which could be used by governments throughout the Muslim-majority state to mitigate Zakat evasion amongst entrepreneurs. Furthermore, the study can provide information to Zakat authorities and policymakers on how to restore public trustworthiness and increase Zakat collection from entrepreneurs as well as cautioning such authorities that social pressure may possess an unfavourable attitude towards Zakat laws, influencing Zakat payers to do this action itself.Originality/valueThis study provides a shred of unique evidence by suggesting a new approach to the Zakat literature and linking the deterrence-based enforcement and social motivation with practice, which contributes to strengthening compliance levels amongst entrepreneurs and ultimately enhancing Zakat funds.

A cohesive model of predicting tax evasion from the perspective of fraudulent financial reporting amongst small and medium sized enterprises

PurposeThe issue of tax evasion through fraudulent financial reporting committed by companies is a major concern facing the tax authority in Malaysia. As such, the purpose of this study is to propose a cohesive model of predicting tax evasion from the perspective of fraudulent financial reporting amongst small- and medium-sized enterprise (SME) taxpayers.Design/methodology/approachThe proposed model for this study is designed to explore the extent of the relationships between the independent variables: family ownership firms, company size, presence of tax professionals, company’s duration in business and frequency of tax audits and the moderating variable, i.e. tax audit officers’ level of competence; and the dependent variable, i.e. tax evasion from the perspective of fraudulent financial reporting. This study is grounded on four theories: agency theory, political cost theory, economic deterrence theory and competency theory. Data will be gathered from actual audit cases resolved by the Inland Revenue Board of Malaysia. Ordinary least square regression analysis is proposed for the investigation.FindingsThis study anticipates that family ownership firms, company size, presence of tax professionals, company’s duration in business and frequency of tax audits could be associated with tax evasion amongst SMEs in Malaysia. This study further proposes that highly competent tax audit officers could mitigate the relationship between frequency of tax audits and tax evasion practices amongst SMEs in Malaysia.Originality/valueThis study should be able to provide a cohesive model of predicting tax evasion from the perspective of fraudulent financial reporting amongst SMEs in Malaysia. Research on fraudulent financial reporting amongst SMEs is very limited, especially involving the level of competence of the tax audit officers; therefore, this study should contribute to the tax evasion literature by providing a comprehensive model of predicting tax evasion through fraudulent financial reporting using a Malaysian tax setting.

To file or not to file? Another dimension of tax compliance - the Eswatini Taxpayers’ survey

Non-filing, the failure to submit a tax declaration, is a widespread phenomenon in sub-Saharan Africa and produces detrimental fiscal effects, from impaired revenue mobilisation to inequality. Non-filing has been largely unexplored in the public finance literature, which focusses mosty on active filers. This paper sheds light on the determinants of non-filing, building on neoclassical and behavioural theories, and adds to the methodological discussion on how to measure tax compliance. Focusing on Eswatini, I combine survey data from one thousand entrepreneurs with their tax returns over 2013–2018. I show that economic deterrence, compliance costs and moral factors, such as intrinsic motivation and peer pressure, correlates with filing. I also study how results change when using a self-reported measure of compliance. In terms of policy, results show that the tax authority could improve filing rates by balancing a deterrent and a service-oriented approach, and also by triggering the role of social norms.

Can Autonomous Vehicles Solve the Commuter Parking Problem?

This paper investigates how autonomous vehicles (AVs) may change the morning commute travel pattern and improve downtown parking. We develop a continuous-time traffic model that takes into account key economic deterrents to driving, such as parking fee and traffic congestion, and characterize the departure time and parking location (downtown or outside downtown parking area) patterns of commuters in equilibrium. To illustrate our results, our model is calibrated to data from Pittsburgh. For the calibrated model, our analysis shows that all AV commuters choose to park outside downtown, increasing both vehicle hours and vehicle miles traveled as compared to the case with all human-driven vehicles. This change increases the total system cost and suggests a potential downtown land-use change (e.g., repurposing downtown parking spots to commercial and residential areas) in Pittsburgh after mass adoption of AVs. To reduce the total system cost, a social planner may be interested in regulating commuters’ decisions by adjusting parking fees and/or imposing congestion tolls as a short-term measure, or adjusting infrastructure, e.g., converting downtown parking spaces to curbside drop-off spots for AVs. Our results indicate that these measures can reduce the total system cost substantially (e.g., up to 70% in our calibrated model).