Factors Affecting Tax Evasion Using Structural Equation Techniques - The Role of Tax Knowledge as a Moderator

Document Type : Scientific paper

Author

Assistant Prof, Accounting Department, University of Mazandaran, Babolsar, Iran

Abstract

Tax, as one of the most important financing Sources of government, play an important role in economic growth and income distribution and depending on their level of development and economic structure. Given the role of taxes in the economy, the phenomenon of tax evasion, which is derived from the lack of professional ethics, as a counter-value can be a serious threat to tax culture and, consequently, the realization of social welfare, and for this reason, the need to identify the causes and intensification of tax evasion due to neglect of ethical aspects and provide solutions in this regard is worth discussing. Investigating the phenomenon of tax evasion and identifying important factors in its formation helps to provide the most appropriate strategies and infrastructure to prevent and reduce it. Tax evasion has not only economic roots, but also the role of social and institutional factors in its formation.
Therefore, the main purpose of this study is to investigate the factors affecting tax evasion by considering the moderating role of tax knowledge. The statistical population of this study was taxpayers of various tax occupations during 2019 and the first half of 2020. Eight cases affecting tax evasion were examined according to Fisher (1992) Modified 4-factor questionnaire. Based on a questionnaire distributed among taxpayers, results show that the variables of non-compliance (Tax rate and income level) and tax system (Probability of discovery, tax offenses, complexity of the tax system and comprehensible government roles) have a positive and significant relationship with the tax evasion variable, While the influence and attitude of peers has not been an effective factor in tax evasion. Also, tax knowledge, as a moderating variable, affects the relationship between significant factors and tax evasion.

Keywords


Alabede, J. O., Ariffin, Z. Z., & Idris, K. M. (2011). Individual taxpayers’ attitude and compliance behaviour in Nigeria: The moderating role of financial condition and risk preference. Journal of Accounting and Taxation, 3(5), 91 - 104.
Allingham, M. G., & Sandmo, A. (1972). Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics, 1, 323 - 338.
Alm, J., McClell, G. H., & Schulze, W. D. (1992). Why do people pay taxes? Journal of Public Economics, 48(1), 21 - 38.
Alm, J. (2012). Measuring, Explaining and Controlling Tax Evasion: Lesson from theory, experiment and field studies. International Tax and Public Finance, 19(1), 54 - 77.
Amina, A., & Saniya, K. (2015). Tax Compliance and Its Determinant the Case of Jimma Zone, Ethiopia. International Journal of Research in Social Sciences, 6(2), 7 - 21.
Arab Mazar Yazdi, A. (2001). The black economy in Iran, its size, causes and effects in the last three decades. Quarterly Journal of Planning and Budgeting, 6 (2 and 3), 3-60. (In Persian).
Arja Sadjiarto, Agatha Nathania Susanto, Evania Yuniar, Melissa Gunawan Hartanto. (2019). Factors Affecting Perception of Tax Evasion Among Chindos. Advances in Economics, Business and Management Research, 144(3), 487-493
Barclay, D.,Higgins, C.,& Thompson, R. (1995). The partial least squre (PLS) illustration. Technology studies, 2(2),285-309
Brink, W.D. and Porcano, T.M. (2016), The Impact of Culture and Economic Structure on Tax Morale and Tax Evasion: A Country-Level Analysis Using SEM, Advances in Taxation  23(2), 87-123.
Chau, G., & Leung, P. (2009). A critical review of Fischer tax compliance model: A research synthesis. Journal of Accounting and Taxation, 1, 34 - 40.
Chen, B.-L. (2003). Tax evasion in a model of endogenous growth. Review of Economic Dynamics, 6, 381 - 403.
Chiumya, C. (2006). Counteracting Tax Evasion in Malawi: An Analysis of the Methods and a Quest for Improvement. International Graduate School of Social Sciences. Yokohama: Yokohama National University.
Clotfelter, C. T. (1983). Tax Evasion and Tax Rates: An Analysis of Individual Returns. The Review of Economics and Statistics, 65(3), 363 - 373
Davari, Ali, Rezazadeh, Arash. (2012). Structural equation modeling with PLS software. University Jihad, Publishing Organization. (In Persian).
Demir, B. Javorcik, B. (2020). Trade policy changes, tax evasion and Benford's law. Journal of Development Economics, 144(1), 33-59.
Demle, E. (2019). Determinants of Tax Evasion in Addis Ababa City Administration: The Case of Bole Sub City Category “A” Taxpayers. A thesis submitted in partial fulfillment of the Requirements for the degree of Master of Science in Accounting and finance.
Fagariba, C. J. (2016). Perceptions of Causes of SMEs and Traders Tax Evasion: A Case of Accra Metropolis, Ghana. American Journal of Economics, 6(2), 116 - 137.
Feinstein, J. (1991). An Econometric Analysis of Income Tax Evasion and Its Detection. The RAND Journal of Economics, 22(1), 14-35.
Feld, L. P., Torgler, B. and Dong, B. (2008). Tax morale, deterrence and social learning after German uniļ¬cation’, School of Economics and Finance Discussion Paper and Working Paper no. 232, Queensland University of Technology.
Fornell, C., Larcker, D. F. (1981). Evaluating Structural equation models with unobservable variables and measurement error. Journal of marketing research, 39-50.
Frey, Bruno S. & Feld, Lars P. (2002). Deterrence and Morale in Taxation: An Empirical Analysis, CESifo Working Paper Series 760, CESifo.
Gioacchino, D., Fichera,D. (2020). Tax evasion and tax morale: A social network analysis. European Journal of Political Economy, 65(3), 65-89.
Hannan, A. (2014). The Determinants of Tax Evasion in Pakistan-A Case Study of Southern Punjab. International Journal of Development and Economic Sustainability, 2(4), 50 - 69.
Harris, K. (1989). On Requiring the Correction of Error Under the Federal Tax Law. The Tax Lawyer, 42(3), 515-576.
Johns, A., & Slemrod, J. (2008). The Distribution of Income Tax Noncompliance. National Tax Journal, 63(3), 397 - 418.
Kiani, M., Shabani Moghadam, K., and Nazari, L. (2020). Investigating the methods of preventing tax evasion in the sports industry in Iran. Applied Research in Sports Science, Education Without Borders, (3) 17, 2-29. (In Persian).
Kidwell, J.M., Stevens, R.E. & Bethke, A.L. (1987). Differences in ethical perceptions between male and female managers: Myth or reality?. J Bus Ethics 6, 489–493.
Kirchler, E. (1997). Balance between giving and receiving: Tax morality and satisfaction with fiscal policy as they relate to the perceived just distribution of public resources. Reitaku International Journal of Economic Studies, 5, 59-70.
Kirchler, E., Hoelzl, E., & Wahl, I. (2008). Enforced versus voluntary tax compliance: The ‘‘slippery slope’’ framework. Journal of Economic Psychology, 29, 210 - 225.
Lidia, X. (2011). Tax Planning, Avoidance and Evasion in Australia 1970-2010: The Regulatory Responses and Taxpayer Compliance. Review Law Journal, 20(1), 1 - 37.
Mansor, M., & Gurama, Z. (2016). The Determinants of Tax Evasion in Gombe State Nigeria. International Journal of Economics and Financial Issues, 11(13), 165 - 170.
Marshal, M. A. (2014). The Impact of Tax Evasion on Revenue Collection Performance in Tanzania: A Case Study of Tanga Tax Region. Mzumbe University, Corporate Managment. Dar es Salaam: Mzumbe University.
McGee, R. W. (2016). The Ethics of tax evasion: an emperical study of Chinese opinion. Journal of Accounting, Ethics & Public Policy, 17(4), 1045 - 1083.
Namaz i, M., Esmaeilpour, H. (2020). Impacts of International Financial Reporting Standards (IFRS) on Tax Evasion and Tax Avoidance. Journal of Accounting of Knowledge, 11(1), 1-33. (In Persian).
Nunally, J. C., Bernstein, I. H. (1994). Psychometric theory (3rd ed). New York, NY:McGraw-Hill.
Orviska, M., & Hudson, J. (2002). Tax evasion, civic duty and the law abiding citizen. European Journal of Political Economy, 19, 83 - 102.
Palil, N. R. (2010). Tax Knowledge and Tax Compliance Determinants in Self-Assessment System in Malaysia. Birmingham Business School, Accounting and Finance. Birmingham: University of Birmingham.
Park, C.-G., & Hyun, J. K. (2003). Examining the determinants of tax compliance by experimental data: a case of Korea. Journal of Policy Modeling, 25(8), 673 - 684.
Pirayie, KH., Rajaie, H. (2015). Measuring the underground economy in Iran and examining its causes and effects. Quarterly Journal of Strategic and Macro Policies, 3(9), 21-42. (In Persian).
Rezagholizadeh, M., Alami, A. (2019). The Effect of Financial Development on Tax Evasion in Iran. Iranian Journal of Economic Research, 24(80), 105-150. (In Persian).
Sameti, M., Sameti, M., Dalali Milan, A. (2023). Estimating the Underground Economy in Iran (1965-2005): A MIMIC Approach. International Economics Studies, 35(2), 89-114. (In Persian).
Sayadisomar, A., Rahnama roodposhti, F., kakaei tabar, Z. (2018). The Causes of Tax Evasion in Iran with Concentration in Gap View of Taxpayers and Tax Staff Based on the AHP Model. Journal of Accounting Research, 8(1), 27-52. (In Persian).
Schneider, F. (2005). Shadow Economics Around the World.What to We Really Know. European Journal of Political Economy, 21(3).
Stankevicius, E., & Leonas, L. (2015). Hybrid approach model for prevention of tax evasion and fraud. Procedia - Social and Behavioral Sciences, 383 - 389.
Tanzi, V. (1980). Inflationary Expectations, Economic Activity, Taxes, and Interest Rates. The American Economic Review, 70(1), 12 - 21.
Torgler, B. (2003). Tax Morale, Rule-Governed Behaviour and Trust. Constitutional Political Economy, 14(2), 119–140.
Tran-Nam, B., & Glover, J. (2002). Tax reform in Australia: Impacts of tax compliance costs on small business. Journal of Australian Taxation, 5, 338.
Weeks, W.A., Moore, C.W., McKinney, J.A.  (1999). The Effects of Gender and Career Stage on Ethical Judgment. Journal of Business Ethics, 20, 301–313