Tax compliance in an EFD-enabled environment: Evidence from a developing economy
-
DOIhttp://dx.doi.org/10.21511/afc.03(1).2020.05
-
Article InfoVolume 3 2020-2021, Issue #1, pp. 53-68
- Cited by
- 772 Views
-
472 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The focus of this study was to assess the contribution of Electronic Fiscal Devices (EFDs) to ensuring tax compliance among small business owners in the Arusha Region in Tanzania. The study was motivated by the fact that the government of Tanzania has invested effort and funds to ensure that revenue adequately supports development projects. Regardless of effort, there is continued reliance on external sources of funds to support development projects. This poses a question on how the introduction of EFDs would increase tax compliance and eventually impact the government income for development projects. The main objective of the study was to determine whether the rate of using EFDs, the level of transparency, fairness in tax procedures, and the perceived audit effectiveness affect the level of tax compliance. Data was analyzed using descriptive procedures, One Way ANOVA, Chi-Square, and ordinal regression. Findings of the study are as follows: First, fairness in tax procedures, the perceived level of transparency and the rate of EFD use had no impact on the level of tax compliance; second, business and EFD use experience, audit effectiveness, and the use of EFDs in tax audits have impacted tax compliance. The study recommends other government departments to consider adopting relevant technology in operational areas where transparency, fairness and compliance are required. The inclusion of other sectors not currently captured by EFD use will be a step in the right direction.
- Keywords
-
JEL Classification (Paper profile tab)H21, H22, H83
-
References77
-
Tables13
-
Figures1
-
- Figure 1. The perceived level of tax compliance
-
- Table 1. Multicollinearity coefficients of equation 1
- Table 2. Demographic variables and tax compliance – ANOVA extracts
- Table 3. Business experience and tax compliance-descriptive extracts
- Table 4. Demographic variables and level of compliance – ordinal regression extracts
- Table 5. Tax compliance and other variables – ANOVA extracts
- Table 6. Ordinal regression results between different variables and tax compliance
- Table 7. EFD use experience and tax compliance – descriptive information extracts
- Table 8. Audit effectiveness and tax compliance – one-way ANOVA mean extracts
- Table 9. Ordinal regression between different variables and tax compliance
- Table 10. EFD use in audit and tax compliance mean extracts
- Table 11. Ordinal regression analysis between different variables and the level of tax compliance
- Table 12. Fairness and tax compliance – mean extracts
- Table 13. Transparency and tax compliance mean extracts
-
- Ade, L. P., Akanbi, A. M., & Tubosun, A. I. (2017). The Influence of Marketing Intelligence on Business Competitive Advantage (A Study of Diamond Bank Plc). Journal of Competitiveness, 9(1), 51-71.
- Agbi, S. E. (2014). The Size of the Tax Evasion Problems on Self-Employment Income: An Examination of Effects of Tax Policies. International Journal of Business and Management Review, 2(3), 73-101.
- Akinboade, O. A. (2015). Correlates of Tax Compliance of Small and Medium Size Businesses in Cameroon. Managing Global Transitions, 13(4), 389-413.
- Alabede, J. O., Ariffin, Z. Z., & Idris, K. M. (2011). Public Governance Quality and Tax Compliance Behavior in Nigeria: The Moderating Role of Financial Condition and Risk Preference. Issues in Social and Environmental Accounting, 5(1), 3-24.
- Al-Maghrebi, M. S., Ahmad, R., & Palil, M. R. (2016). Budget Transparency and Tax Awareness Towards Tax Compliance: A Conceptual Approach. South East Asia Journal of Contemporary Business, Economics and Law, 10(1), 95-101.
- Al-Mamun, A., Entebang, H., Mansor, S. A., & Yasser, Q. R. (2014). The Impact of Demographic Factors on Tax Compliance Attitude and Behavior in Malaysia. Journal of Finance, Accounting and Management, 5(1), 109-124.
- Antwi, S. K., & Hamza, K. (2015). Qualitative and Quantitative Research Paradigms in Business Research: A Philosophical Reflection. European Journal of Business and Management, 7(3), 217-225.
- Aramide, S. F., & Bashir, M. M. (2015). The Effectiveness of Internal Control System and Financial Accountability at Local Government Level in Nigeria. International Journal of Research in Business Management, 3(8), 1-6.
- Badara, M. S. (2012). The Effect of Tax Audit on Tax Compliance in Nigeria (A Study of Bauchi State Board of Internal Revenue). Research Journal of Finance and Accounting, 3(4), 74-80.
- Bartlett, J., Kotrlik, J., & Higgins, C. (2001). Determining Appropriate Sample Size in Survey Research. Information Technology, Learning, and Performance Journal, 19(1), 43-50.
- Beer, S., Kasper, M., Kirchler, E., & Erard, B. (2019). Do Audits Deter or Provoke Future Tax Noncompliance? Evidence on Self-employed Taxpayers (IMF Working Papers No. 223).
- Bostan, I., Popescu, C., Istrate, C., Robu, I.-B., & Hurjui, I. (2017). The Impact of Taxation of the Domestic Economic Transactions on the VAT Collection Through Electronic Fiscal Devices. Amfiteatru Economic Journal, 19(45), 581-594.
- Bowling, A. (2005). Mode of questionnaire administration can have serious effects on data quality. Journal of Public Health, 27(3), 281-291.
- Chatama, Y. J. (2013). The Impact of ICT on Taxation: The Case of Large Taxpayer Department of Tanzania Revenue Authority. Developing Country Studies, 3(2), 91-100.
- Chau, G., & Leung, P. (2009). A Critical Review of Fischer Tax Compliance Model: A Research Synthesis. Journal of Accounting and Taxation, 1(2), 34-40.
- Chege, A., Kiragu, N., Lagat, C., & Muthoni, G. (2015). Effect of Electronic Fiscal Devices on VAT Collection in Tanzania: A Case of Tanzania Revenue Authority. European Journal of Business and Management, 7(33), 125-133.
- Curristine, T., Lonti, Z., & Joumard, I. (2007). Improving Public Sector Efficiency: Challenges and Opportunities. OECD Journal on Budgeting, 7(1).
- Darwish, H., Saki, N., Sahraei, M., Zakrifar, F., & Talebi, S. M. (2014). Effects of Automated Office Systems (Automation) on Improve Decision-Making of Staff Managers. Journal of Educational and Management Studies, 4(3), 554-564.
- Devos, K., & Zackrisson, M. (2015). Tax Compliance and the Public Disclosure of Tax Information: An Australia/Norway Comparison. Journal of Tax Research, 13(1), 108-129.
- Deyganto, K. O. (2018). Factors Influencing Taxpayers’ Voluntary Compliance Attitude with Tax System: Evidence from Gedeo Zone of Southern Ethiopia. Universal Journal of Accounting and Finance, 6(3), 92-107.
- Drogalas, G., Ioannis, S., Dimitra, K., & Ioannis, D. (2015). Tax audit effectiveness in Greek firms: Tax auditors’ perceptions. Journal of Accounting and Taxation, 7(7), 123-130.
- Dulock, H. L. (1993). Research Design: Descriptive Research. Journal of Pediatric Oncology Nursing, 10(4), 154-157.
- Edogbanya, A., & Sule, J. (2013). Revenue Generation: It’s Impact on Government Developmental Effort (A Study of Selected Local Council in Kogi East Senatorial District). Global Journal of Management and Business Research Administration and Management, 13(4), 13-26.
- Emmanuel, O. E., Ajanya, M. A., & Audu, F. (2013). An Assessment of Internal Control Audit on the Efficency of Public Sector in Kogi State Nigeria. Mediterranean Journal of Social Sciences, 4(11), 717-726.
- Enahoro, J., & Jayeola, O. (2012). Tax Administration and Revenue Generation of Lagos State Government, Nigeria. Research Journal of Finance and Accounting, 3(5), 133-139.
- Engida, T. G., & Baisa, G. A. (2014). Factors Influencing Taxpayers’ Compliance with the Tax System: An Empirical Study in Mekelle City, Ethiopia. eJournal of Tax Research, 12(2), 433-452.
- Gangl, K., Hofmann, E., & Kirchler, E. (2015). Tax Authorities’ Interaction with Taxpayers: A Conception of Compliance in Social Dilemmas by Power and Trust. New Ideas in Pschology, 37, 13-23.
- Gberegbe, F. B., & Umoren, A. O. (2017). The Perception of Tax Fairness and Personal Income Tax Compliance of SMEs in Rivers State. Journal of Research in Business and Management, 5(2), 40-51.
- Geetha, R., & Sekar, M. (2012). E-Filing of Income Tax: Awareness and Satisfaction Level of Individual Taxpayers in Coimbatore City, India. Research Journal of Management Sciences, 1(4), 6-11.
- Gemmell, N., & Ratto, M. (2017). The Effects of Penalty Information on Tax Compliance: Evidence from a New Zealand Field Experiment (Working Papers No. 03/2017).
- Grimmelikhuijsen, S., Porumbescu, G., Hong, B., & Im, T. (2013). The Effect of Transparency on Trust in Government: A Cross-National Comparative Experiment. Public Administration Review, 73(4), 575-586.
- Gurama, Z., Mansor, M., & Pantamee, A. A. (2015). Tax Evasion and Nigeria Tax System: An Overview. Research Journal of Finance and Accounting, 6(8), 202-211.
- Hartner, M., Rechberger, S., Kirchler, E., & Schabmann, A. (2008). Procedural Fairness and Tax Compliance. Economic Analysis and Policy, 38(1), 137-152.
- Hebous, S., Jia, Z., Løyland, K., Thoresen, T. O., & Øvrum, A. (2020). Do audits improve future tax compliance in the absence of penalties? Evidence from random audits in Norway (CESifo Working Paper No. 8480).
- Hoffman, B. D., & Gibson, C. C. (2009). Political Accountability and Public Service Provision in Africa: Zambia and Tanzania. Indiana, Indiana University.
- Ikasu, E. J. (2014). Assessment of Challenges Facing the Implementation of Electronic Fiscal Devices (EFDs) in Revenue Collection in Tanzania. International Journal of Research in Business and Technology, 5(3), 23-31.
- Janeska-Iliev, A., & Debarliev, S. (2015). Factors Affecting Growth of Small Business: The Case of a Developing Country having Experienced Transition. European Scientific Journal, 11(28), 1-28.
- Kagoro, V. (2011). Taxpayers’ Perceptions on Tax Structure and Administration System on Voluntary Tax Compliance – A survey of Individual Taxpayers in Arusha and Mbeya Regions. The Accountancy and Business Review, 8(1-2), 35-41.
- Kira, A. R. (2016). The Perceptions of Taxpayers on the Adoption of Electronic Fiscal Devices (EFDs) in Revenue Collection in Tanzania: The Case of Dodoma. International Journal of Academic Research in Business and Social Sciences, 6(12), 39-55.
- Lawan, J. U. (2017). A Review of Fischer Tax Compliance Model: A Proposal for Nigeria. International Journal of Advanced Academic Research, 3(7), 54-69.
- Lubua, E. (2014). Influencing Tax Compliance in SMEs through the use of ICTs. International Journal of Learning, Teaching and Educational Research, 2(1), 80-90.
- Lubua, E. W., & Pretorius, P. D. (2019). Factors Determining the Perceived Relevance of Social Commerce in the African Context. South African Journal of Information Management, 21(1), 1-8.
- Lumumba, O. M., Obongo, B. M., Magutu, P. O., & Onsongo, C. O. (2010). The effectiveness of electronic tax registers in processing of value added tax returns. African Journal of Business & Management, 1(1), 44-54.
- Machogu, C. G., & Amayi, J. B. (2013). The Effect of Taxpayer Education on Voluntary Tax Compliance, Among SMEs in Mwanza City – Tanzania. International Journal of Marketing, Financial Services & Management Research, 2(8), 12-23.
- Maisiba, G. J., & Atambo, W. (2016). Effects of Electronic- Tax System on the Revenue Collection Efficiency of Kenya Revenue Authority: A Case of Uasin Gishu County. Imperial Journal of Interdisciplinary Research (IJIR), 2(4), 815-827.
- Malima A. E. (2020). The effectiveness of electronic fiscal devices in ensuring tax compliance among small business owners of Arusha-Tanzania (PhD Thesis). University of KwaZulu-Natal, South Africa.
- Malima, A. (2013). Enhancing Income Tax Collection in SMEs Customers’ Perspective. Dar Es Salaam: Mzumbe University.
- Mandari, H., Koloseni, D., & Nguridada, J. (2017). Electronic Fiscal Device (EFD) Acceptance for Tax Compliance Among Trading Business Community in Tanzania: The Role of Awarenes and Trust. International Journal of Economics, Commerce and Management, 5(3), 142-158.
- Mansor, N. H., Mohamed, I. S., Ling, L. M., & Zakaria, N. B. (2015). The Computerized Tax Decision Aid in Malaysia. International Academic Research Journal of Social Science, 1(1), 51-57.
- Mativo, P., Muturi, W., & Nyang’au, A. (2015). Factors Affecting the Utilisation of Electronic Tax Registers to SMEs. International Journal of Economics, Commerce and Management, 3(3), 1-24.
- Ministry of Finance Tanzania. (2015). The Estimates of Government Revenue and Expenditure for Fiscal Year 2014/2015 (Speech by the Minister for Finance).
- Muhrtala, T. O., & Ogundeji, M. (2013). Professionals’ Perspective of Tax Evasion: Some Evidence from Nigeria. Universal Journal of Accounting and Finance, 1(2), 35-41.
- Mukhlis, I., Utomo, S. H., & Soesetio, Y. (2015). The Role of Taxation Education on Taxation Knowledge and Its Effect on Tax Fairness as well as Tax Compliance on Handicraft SMEs Sectors in Indonesia. International Journal of Financial Research, 6(4), 161-169.
- Muriithi, C. (2013). The Relationship Between Government Revenue and Economic Growth in Kenya. International Academic Journal of Information Sciences and Project Management, 1(1), 87-109.
- National Bureau of Statistics. (2019). Tanzania in Figures 2018.
- Obicci, P. A. (2015). Impact of Political Transparency on Public Service Delivery in Uganda. International Journal of Advances in Management and Economics, 4(1), 35-46.
- Okpeyo, E. T., Gakpetor, E. D., & Mussah, A. (2019). Determinants of Tax Compliance in Ghana: The Case of Small and Medium Tax Payers in Greater Accra Region. Journal of Applied Accounting and Taxation, 4(1), 1-14.
- Palil, M. R., Hamid, M. A., & Hanafiah, M. H. (2013). Taxpayers Compliance Behaviour: Economic Factors Approach. Jurnal Pengurusan, 38, 75-85.
- Sapiei, N. S., Kasipillai, J., & Eze, U. C. (2014). Determinants of Tax Compliance Behavior of Corporate Taxpayers in Malaysia. eJournal of Tax Research, 12(2), 383-409.
- Sevilla, J. (2005). Accountability and Control of Public Spending in a Decentralised and Delegated Environment. OECD Journal of Budgeting, 5(2), 1-21.
- Sidik, M. H., Zandi, G. R., & Ruhoma, A. S. (2019). Examining the Influence of Fairness Perception on Tax Compliance Behavior of the Libya Individual Taxpayers: The Moderating Tax Awareness and Tax Complexity. Humanities & Social Sciences Reviews, 7(2), 519-525.
- Simangunson, R. (2014). The Impact of Internal Control Effectiveness and Internal Audit Role toward the Performance of Local Government. Research Journal of Finance and Accounting, 5(7), 50-58.
- Singh, A. S., & Masuku, M. B. (2014). Sampling technique and determination of the sample size. International Journal of Economics, Commerce and Management, 2(11), 1-22.
- Sobh, R., & Perry, C. (2006). Research Design and Data Analysis in Realism Research. European Journal of Marketing, 40(11/12), 1194-1209.
- Suresh, K. P., & Chandrashekara, S. (2012). Sample size estimation and power analysis for clinical research studies. Journal of Human Reproductive Science, 5(1), 7-13.
- Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA). (2009). SME Tool Kit. Dar es Salaam: Tanzania Chamber of Commerce, Industry and Agriculture.
- Tanzania Revenue Authority. (2018a). Tax collections statistics.
- Tanzania Revenue Authority. (2018b). Income Tax for Individual.
- Taylor, P., & Medina, M. (2013). Educational Research Paradigms: From Positivism to Multiparadigmatic. Journal for Meaning Centered, 1(1), 1-16.
- Thomas, C. (2012). Assessing Tax Fairness Dimensions in a Small Developing Economy. Business and Economics Journal, 62, 1-8.
- Verboon, P., & Goslinga, S. (2009). The Role of Fairness in Tax Compliance. Journal of Psychology, 65(1), 136-145.
- Vries, M. (2013). The Challenge of Good Governance. The Public Sector Innovation Journal, 18(1), 1-9.
- Walsham, G. (2006). Doing Interpretive Research. European Journal of Information Systems, 15(3), 320-330.
- Williams, C. (2007). Research Methods. Journal of Business & Economic Research, 5(3), 65-72.
- Wu, W., Ma, L., & Yu, W. (2017). Government Transparency and Perceived Social Equity: Assessing the Moderating Effect of Citizen Trust in China. Administration and Society, 49(6), 882-906.
- Yildiz, B. (2019). A Theoretical Analysis on Tax Auditing-Tax Compliance Determinants and Bomb Crater Effect. In A. Akıncı & Ö. Özçelik (Eds.), Turkey’s Economic, Fiscal and Social Problems (pp. 73-91). Ekin Yayınevi, Bursa.
- Yunus, N. B., Ramli, R. B., & Hassan, N. S. (2017). Tax Penalties and Tax Compliance of Small Medium Enterprises (SMEs) in Malaysia. International Journal of Business, Economics and Law, 12(1), 81-91.