Tax is the main source of revenue for a country’s overall development and growth. Tax compliance is when an individual fulfills their tax obligation within a stipulated period under the tax laws. However, most taxpayers don’t comply with tax laws and engage in tax evasion and avoidance activities. Here are 7 factors that can deter tax compliance.
Compliance cost
Compliance cost is extra than the actual tax liability that a taxpayer pays to become or remain tax compliant. Sometimes compliance costs seem to be higher than the actual taxes
This makes taxpayers avoid fulfilling the tax obligations.
Tax knowledge
Tax knowledge is means taxpayers understand the tax policies. It also means a taxpayer is aware and sensitive of tax legislation or laws. When a person understands tax laws, it is easy for them to pay taxes. Because they understand that failure to pay taxes will attract penalties and fines, where the taxpayer has little or no knowledge about tax, cases of evasion or non-tax compliance can arise.
Tax morale
Tax knowledge is the intensity at which taxpayer is aware and sensitive of tax legislation or laws. Educating taxpayers on the importance of paying taxes can help improve their morale towards taxes. As a result, it improves tax compliance. Without tax morale, means tax compliance would be on the lower side than expected.
Tax fairness
Tax fairness is when the tax system is equal to all. When a tax system favors some groups and not others, one may decide not to conform to the tax laws. They might not be happy dealing with its unfaithfulness.
Tax system
Tax systems are the elements of tax and fees charged by a state and forms parts of its organization. They are regulatory and legal for the basis of taxation. They include the regression tax system, progressive tax system, and proportional tax system. Where a tax system is unfavorable to the taxpayer, then cases of non-compliance may arise. An unfavorable tax system doesn’t encourage such taxpayers to conform to the tax laws.
Attitude towards taxes
Attitude is how someone perceives something in their understanding. When a taxpayer has a terrible attitude towards taxes, they will not conform to the tax laws.
Tax rates
Tax rates are percentages to which income is taxed. When the tax rate is high, one may shy away from being tax compliant. They may feel that tax authorities take away most of their income. So, the taxpayer would rather break the laws than pay the taxes.
Audit probabilities
Tax audit examines tax returns to verify income tax and the actual deduction are accurate. In a situation where there is a likelihood of having a tax audit, a taxpayer would be compliant. Where there are no possibilities of a tax audit, the taxpayer would be uncertain on whether to be tax compliant or not.
Level of income
The amount of money a taxpayer earn has influenced whether the taxpayer has less income and more expenses. The chances of non-conformity tend to arise, thereby non-compliance cases.
Summary
