Understanding Motivations of Tax Compliance Behaviour:  Role of Religiosity and Tax Knowledge

Lutfi Hasssen Al-Ttaffi; Saeed A. Bin-Nashwan

doi:10.37231/jmtp.2022.3.1.185

Lutfi Hasssen Al-Ttaffi Seiyun University
Saeed A. Bin-Nashwan Islamic Business School, Universiti Utara Malaysia, and College of Administrative Sciences, Seiyun University, Seiyun, Yemen

DOI: https://doi.org/10.37231/jmtp.2022.3.1.185

Abstract

The aim of this paper is to enhance the understanding of taxpayers’ motivations to comply with tax rules in a developing country like Yemen. Intrinsic motivations, such as religiosity and knowledge can play an important role in driving taxpayers to engage in compliance with tax authorities’ laws and regulations. Therefore, in this study, the effect of these internal factors on tax compliance has been examined. A cross-sectional approach has been utilized through a self-administered survey managed by individual taxpayers in Yemen to collect from 287 individual taxpayers. Multiple regression was employed to examine the relationship between variables of this study. The results show that taxpayers’ compliance is negatively related to the level of religiosity, while positively influenced by knowledge of taxpayers. This paper provides significant insights for tax authorities and policymakers in developing countries, and in Yemen particularly, to provide more arguments to taxpayers about the importance of payment of tax, by adopting and deploying the perspectives of the Islamic scholars that have a positive perception about tax. Furthermore, tax authorities are advised to concentrate on enhancing citizens’ tax knowledge which will lead to improvement in their compliance behaviour.

Downloads

Download data is not yet available.

References

Abdul-Jabbar, H., & Pope, J. (2008). Exploring the relationship between tax compliance costs and compliance issues in Malaysia. Journal of Applied Law and Policy, 1(1), 1-20. https://search.informit.org/doi/epdf/10.3316/informit.655943155006569

Abodher, F. M., Ariffin, Z. Z., & Saad, N. (2020). Religious factors on tax non-compliance: evidence from Libyan self-employed. Problems and Perspectives in Management, 18(1), 278-288. http://dx.doi.org/10.21511/ppm.18(1).2020.24

Adam, C. & Webly, P. (2012). Small business owner’s attitude on vat compliance in the UK. Journal of Economy Psychology, 22(2), 195-216. https://doi.org/10.1016/S0167-4870(01)00029-0

Ahmad, M. A., Mustafa, M. H., & Noor, M. A. (2007). The effects of knowledge on tax compliance behaviour among Malaysian taxpayers. Retrieved March 14, 2020, from ibacnet.org/bai2007/proceedings papers/2007bai7357.doc.

Ajzen, I. (1991), The theory of planned behavior, Organizational Behavior and Human Decision Processes, 50(2), 179-211. https://doi.org/10.1016/0749-5978(91)90020-T

Aliman, N. K., Ariffin, Z. Z., & Hashim, S. M. (2018). Religiosity commitment and decision-making styles among Generation Y Muslim consumers in Malaysia. International Journal of Academic Research in Business and Social Sciences, 8(1), http://dx.doi.org/10.6007/IJARBSS/v8-i1/3830

Al-Saadi, M. (2014). International cooperation: Vision and mission. Al-Thawra Gazette (Issued daily by the Yemeni Prime Minister). Issue of 17 July, 2014. Sana'a.

Al-Ttaffi, L. H. A. (2017). Determinants of tax non-compliance behaviour of Yemeni SMEs: a moderating role of Islamic religious perspective. Unpublished doctoral dissertation, Universiti Utara Malaysia.

Al-Ttaffi, L. H. A., & Abdul-Jabbar, H. (2018). Geopolitical differences and tax non-compliance among Yemeni SMEs. Journal of Business Management and Accounting, 8(1), 31-45. https://doi.org/10.32890/jbma2018.8.1.8795

Al-Ttaffi, L. H. A., Abdul-Jabar, H., & Bin-Nashwan, S. A. (2021). The role of income tax system structure in tax non-compliance behaviour among SMEs in Yemen. International Journal of Banking and Finance, 16(2), 23–49. https://doi.org/10.32890/ijbf2021.16.2.2

Al-Ttaffi, L. H. A., Abdul-Jabbar, H., & Bin-Nashwan, S. A. (2021). Does religious perspective influence tax non-compliance? Evidence from Yemen. International Journal of Ethics and Systems. 37(2), 222-244. https://doi.org/10.1108/IJOES-04-2020-0062

Al-Ttaffi, L. H. A., Bin-Nashwan, S. A., Amrah, M. R. (2020). The influence of tax knowledge on tax compliance behaviour: A case of Yemeni individual taxpayers. Journal of Business Management and Accounting, 10(2), 15-30. https://doi.org/10.32890/jbma2020.10.2.2

Aziz, S. A., & Al_Harethi, A. R. S. (2018). Factors Determining Tax Administration Efficiency in Hadhramout, Yemen: Perception from Individual Taxpayers. Paper presented at 5th International Conference on Accounting Studies (ICAS 2018), Penang, Malaysia, October 2018.

Baier, C. J., & Wright, B. R. (2001). “If you love me, keep my commandments”: A meta-analysis of the effect of religion on crime. Journal of research in crime and delinquency, 38(1), 3-21.

Bandura, A. (1977). Self-efficacy: Toward a unifying theory of behavioural change. Psychological Review, 84(2), 191.

Baru, A. (2016). The impact of tax knowledge on tax compliance. Journal of Advanced Research in Business and Management Studies, 6(2), 22-30.

Bidin, Z., Idris, K., & Shamsudin, F. (2009). Predicting compliance intention on zakah on employment income in Malaysia: An application reasoned action theory. Jurnal Pengrusan, 28, 85-102.

Bin-Nashwan, S. A., Abdul-Jabbar, H., & Aziz, S. A. (2019). Do enforcement, religiosity and peer influence zakah compliance behavior?. International Journal of Financial Research, 10(6), 42-53. https://doi.org/10.5430/ijfr.v10n6p42

Bin-Nashwan, S. A., Abdul-Jabbar, H., & Romle, A. R. (2016). The application of theory of planned behaviour on business zakah compliance in Yemen: A proposed framework. Middle-East Journal of Scientific Research, 24(6), 2052-2057. https://doi.org/10.5829/idosi.mejsr.2016.24.06.23645

Bin-Nashwan, S. A., Al-Hamedi, A. M., Marimuthu, M., & Al_Harethi, A. R. (2020). Study on system fairness dimensions and tax compliance in the Middle East context. Problems and Perspectives in Management, 18(1), 181-191. http://dx.doi.org/10.21511/ppm.18(1).2020.16

Bin-Nashwan, S.A., Muneeza, A. and Kunhibava, S. (2022), What motivates retail investors to invest in government-issued digital sukuk during COVID-19?, Journal of Islamic Accounting and Business Research, available at: https://doi.org/10.1108/JIABR-12-2020-0387

Bloodgood, J. M., Turnley, W. H., & Mudrack, P. (2008). The influence of ethics instruction, religiosity, and intelligence on cheating behavior. Journal of business ethics, 82(3), 557-571. https://doi.org/10.1007/s10551-007-9576-0

Brown, R. E., & Mazur, M. J. (2003). IRS's comprehensive approach to compliance measurement. National Tax Association Symposium. New York: National Tax Association.

Bulutoding, L., Habbe, A., Parmitasari, R. D. A., Alwi, Z., & Abdullah, M. W. (2020). Moslem Taxpayers’ compliance behavior in Malaysia. International Journal of Advanced Engineering Research and Science, 7(3), 214-224. https://dx.doi.org/10.22161/ijaers.73.35

Central Organization of Control & Audit COCA. (2016). Annual report. Retrieved from http://www.arabosai.org

Cornwell, B., Cui, C. C., Mitchell, V., Schlegelmilch, B., Dzulkiflee, A., & Chan, J. (2005). A cross‐cultural study of the role of religion in consumers' ethical positions. International Marketing Review. 22(5), 531-546. https://doi.org/10.1108/02651330510624372

Davis, F. D., Bagozzi, R. P. and Warshaw, P. R. (1989). User acceptance of computer technology: a comparison of two theoretical models. Management Science, 35(8): 982-1003. https://doi.org/10.1287/mnsc.35.8.982

Eriksen, K., & Fallan, L. (1996). Tax knowledge and attitudes towards taxation; A report on a quasi-experiment. Journal of economic psychology, 17(3), 387-402. https://doi.org/10.1016/0167-4870(96)00015-3

Fallan, L. (1999). Gender, exposure to tax knowledge, and attitudes towards taxation; an experimental approach. Journal of Business Ethics, 18(2), 173-184. https://doi.org/10.1023/A:1005711905297

Fauziati, P., Minovia, A. F., Muslim, R. Y., & Nasrah, R. (2016). The impact of tax knowledge on tax compliance case study in kota padang, Indonesia. Journal of Advanced Research in Business and Management Studies, 2(1), 22-30.

Feld, L. P., & Torgler, B. (2007). Tax morale after the reunification of Germany: results from a quasi-natural experiment. CESifo Working Paper, No. 1921

Feust, C., & Riedel, N. (2009). Tax evasion, tax avoidance and tax expenditures in developing countries: A review of the literature. Report prepared for the UK Department for International Development (DFID).

Fischer, C. M., Wartick, M., & Mark, M. (1992). Detection probability and tax compliance: A review of the literature. Journal of Accounting Literature, 11(2), 1-46.

Gupta, R., & McGee, R. W. (2010). A Comparative study of New Zealanders’ opinion on the ethics of tax evasion: Students versus Accountants. New Zealand Journal of Taxation Law and Policy, 16(1), 47-84.

Hanefah, M. (1997). An evaluation of Malaysian tax administrative system and taxpayers perceptions towards assessment system, tax law fairness and tax law complexity. Unpublished doctoral dissertation, Universiti Utara Malaysia.

Harris, T.D. (2013). The effect of tax knowledge on individual’s perceptions of fairness and compliance with federal income tax system: An empirical study. Unpublished manuscript, University of South Carolina, South Carolina.

Hogg, M. A., & Vaughan, G. M. (2005). Social Psychology, Fourth edition. Harlow: Pearson Education Ltd.

Iredele, O. (2018). Assessment of Voluntary Tax Compliance among Informal Economy in Nigeria. Paper presented at 89th ISERD International Conference, Oxford, United Kingdom, October 2017.

Jackson, B. R., & Milliron, V. C. (1986). Tax compliance research: Finding, problem and prospects. Journal of Accounting Literature, 5(1), 125-165.

Kasipillai, J., & Abdul-Jabbar, H. (2013). Gender and ethnicity differences in tax compliance. Asian Academy of Management Journal, 11(2), 73-88.

Keller, A. C., Smith, K. T., & Smith, L. M. (2007). Do gender, educational level, religiosity, and work experience affect the ethical decision-making of US accountants?. Critical perspectives on accounting, 18(3), 299-314. https://doi.org/10.1016/j.cpa.2006.01.006

Kelman, H. (1958). Compliance, identification, and internalization: Three processes of attitude change. Journal of Conflict Resolution, 2(1), 51-60. https://doi.org/10.1177/002200275800200106

Kirchler, E., & Maciejovsky, B. (2001). Tax compliance within the context of gain and loss situations, expected and current asset position, and profession. Journal of Economic Psychology, 22(2), 173-194. https://doi.org/10.1016/S0167-4870(01)00028-9

Klepper, S., Mazur, M., & Nagin, D. (1991). Expert intermediaries and legal compliance: The case of tax preparers. Journal of Law & Economics, 34(1), 205-229. https://doi.org/10.1086/467224

Loo, E.C. (2016). The influence of the introduction on self-assessment on compliance behaviour of individual taxpayers in Malaysia, Doctoral dissertation, University of Sydney.

Manaf, N. A. (2004). Land tax administration and compliance attitude in Malaysia (Unpublished doctoral thesis). University of Nottingham, United Kingdom.

Manuputty, I. G., & Sirait, S. (2016). Pengaruh Pengetahuan Perpajakan dan Penerapan Self Assesment System Terhadap Kesadaran Wajib Pajak Serta Dampaknya Terhadap Kepatuhan Wajib Pajak Pada KPP Pratama Jakarta Panjaringan. Media Akuntansi Perpajakan, 1(2).

Margolis, H. (1997). Dealing with risk: why the public and the experts disagree on environmental issues. University of Chicago Press.

Mas’ud, A., Aliyu, A. A., Gambo, E. M. J., Al-Qudah, A. A., & Al Sharari, N. (2014). Tax rate and tax compliance in Africa. European Journal of Accounting Auditing and Finance Research, 2(3), 22-30.

Masari, N. M. G., & Suartana, I. W. (2019). Effect of tax knowledge, service quality, tax examination, and technology of compliance regional tax mandatory. International research journal of management, IT and social sciences, 6(5), 175-183. https://doi.org/10.21744/irjmis.v6n5.722

McGee, R. W., & Tyler, M. (2006). Tax evasion and ethics: A demographic study of 33 countries. Paper Presented at the Fifteenth Annual World Business Congress of the International Management Development Association (IMDA), Sarajevo, Bosnia, June 2006..

McKerchar, M. & Hansford, A. (2015). Achieving innovation and global competitiveness through research and development tax incentives: lessons for Australia from the UK. Australian Tax Forum, 27(1), 3-23. https://search.informit.org/doi/10.3316/informit.660690450888131

Ministry of Planning & International Cooperation MPIC. (2018). Annual Report. Retrieved from http://www.yemen.gov.ye

Mohdali, R. (2013). The Influence of Religiosity on Tax Compliance in Malaysia. Unpublished doctoral dissertation, Curtin Business School, School of Economics and Finance, Curtin University, Australia.

Mohdali, R., & Pope, J. (2012). The effects of religiosity and external environment on voluntary tax compliance. New Zealand Journal of Taxation Law and Policy, 18(2), 119-139.

Mustafa, M. H. (1997). An evaluation of Malaysian tax administrative system and taxpayers perceptions towards assessment system, tax law fairness and tax law complexity. (Unpublished doctoral thesis), Universiti Utara Malaysia.

National Institute of Standard and Technology USA. (2010). E-handbook of statistical methods. Retrieved July 19, 2019, from www.itl.nist.gov/div898/handbook .

Newman, W., Charity, M., & Ongayi, W. (2018). Literature review on the impact of tax knowledge on tax compliance among small medium enterprises in a developing country. International Journal of Entrepreneurship, 22(4), 1244-1259.

Nwidobie, B. M. (2018). Determinants of voluntary tax compliant behaviours in Nigeria. International Journal of Critical Accounting, 10(1), 59-69. https://www.inderscienceonline.com/doi/abs/10.1504/IJCA.2018.091181

Nyamwanza, T., Mavhiki, S., Mapetere, D., & Nyamwanza, L. (2014). An analysis of SMEs’ attitudes and practices toward tax compliance in Zimbabwe. Sage Open, 4(3), 322-328. https://doi.org/10.1177/2158244014542776

Obaid, M. M., Ibrahim, I., & Udin, N. M. (2020). An Investigation of the Determinants of Tax Compliance Among Yemeni Manufacturing SMEs Using the Fisher Model. International Journal of Psychosocial Rehabilitation, 24(04), 1809-1824. https://doi.org/10.37200/IJPR/V24I4/PR201289

Oktaviani, R., Kurnia, H., Sunarto, S., & Udin, U. (2020). The effects of taxpayer knowledge and taxation socialization on taxpayer compliance: The role of taxpayer awareness in developing Indonesian economy. Accounting, 6(2), 89-96. https://doi.org/10.5267/j.ac.2019.12.004

Palil, M. R. (2010). Tax knowledge and tax compliance determinants in self-assessment system in Malaysia. Unpublished doctoral dissertation, University of Birmingham.

Pertiwi, A. R., Iqbal, S., & Baridwan, Z. (2020). Effect of fairness and knowledge on tax compliance for Micro, Small, and Medium Enterprises (MSMEs). International Journal of Research in Business and Social Science, 9(1), 143-150. https://doi.org/10.20525/ijrbs.v9i1.590

Rettinger, D. A., & Jordan, A. E. (2005). The relations among religion, motivation, and college cheating: A natural experiment. Ethics & Behavior, 15(2), 107-129. https://doi.org/10.1207/s15327019eb1502_2

Richardson, M., & Sawyer, A. J. (2001). Taxonomy of the tax compliance literature: Further findings, problems and prospects. Australian Tax Forum, 16(2), 137-284.

Ross, A. M., & McGee, R. W. (2012). Education level and ethical attitude toward tax evasion: A six-country study. Journal of Legal, Ethical and Regulatory Issues, 15(2), 93-138. http://dx.doi.org/10.2139/ssrn.2410582

Spillker, B. C. (1995). The effects of time pressure and knowledge on key word selection behaviour in tax research. The Accounting Review, 70(1), 49-70.

Stack, S., & Kposowa, A. (2006). The effect of religiosity on tax fraud acceptability: A cross‐national analysis. Journal for the scientific study of religion, 45(3), 325-351. https://doi.org/10.1111/j.1468-5906.2006.00310.x

Subramaniam, M., Abdin, E., Vaingankar, J. A., Shafie, S., Chua, B. Y., Sambasivam, R. & Chong, S. A. (2020). Tracking the mental health of a nation: prevalence and correlates of mental disorders in the second Singapore mental health study. Epidemiology and psychiatric sciences, 29(1),1-10. https://doi.org/10.1017/S2045796019000179

Subramaniam, M., Vaicondam, Y., Nadarajan, D., & Leng, Y. L. (2020). Sociology of Individual Voluntary Tax Compliance. International Journal of Psychosocial Rehabilitation, 24(1), 907-917. https://doi.org/10.37200/IJPR/V24I1/PR200197

Sussman, R., & Gifford, R. (2013). Be the change you want to see: Modeling food composting in public places. Environment and Behavior, 45(3), 323-343. https://doi.org/10.1177/0013916511431274

Tittle, C. R., & Welch, M. R. (1983). Religiosity and deviance: Toward a contingency theory of constraining effects. Social forces, 61(3), 653-682. https://doi.org/10.1093/sf/61.3.653

Torgler, B. (2003). Tax morale: Theory and analysis of tax compliance. Unpublished doctoral thesis, University of Zurich, Switzerland.

Torgler, B. (2012). Tax morale, eastern Europe and European enlargement. Communist and Post-Communist Studies, 45(1-2), 11-25. https://doi.org/10.1016/j.postcomstud.2012.02.005

Torgler, B., & Schneider, F. (2007). What shapes attitudes toward paying taxes? Evidence from multicultural European countries. Social Science Quarterly, 88(2), 443-470. https://doi.org/10.1111/j.1540-6237.2007.00466.x

Torgler, B., Schaffner, M., & Macintyre, A. (2007). Tax compliance, tax morale, and governance quality. International Studies Program Working Paper, Andrew Young School of Policy Studies, Georgia State University.

Transparency International's Quarterly Newsletter TIQN. (2005). Auditing body to fight corruption. Retrieved from http://www.transparency.org/content/download/2270/14250/version/1/file/ti _q_jun2005.pdf

United Nations Development Program UNDP. (2005). Program on /Governance in the Arab Region. Washington District of Colombia.