Examining Different Factors of Income Tax Non-Compliance in a Small Sample in Bangladesh

Open access


Income tax non-compliance is worldwide delinquent and with the small volume of income tax collection Bangladesh has been facing its demerits for a long time. There is still a gap to measure income tax non-compliance behaviour in a micro direct approach. This study uses EVSCALE instrument to calculate the individual income tax non-compliance as a latent variable. The instrument consists of 15 items in Likert scale to measure the non-compliance behaviour of a person. The objective of this study is to identify the determinants of income tax non-compliance and key factors of EVSCALE in Bangladesh. The study collected opinions of taxpayers by primary data collection following a convenient sampling method. Logit regression analysis finds out that log monthly income, tax morale, tax education and occupation significantly influence income tax non-compliance. Exploratory factor analysis identifies six key factors that have consistency and shared variance. However, Cronbach’s alpha shows that five key factors have high reliability among six factors. According to rules of thumb, this study suggests that EVSCALE instrument needs modification by adding more items. This study argues that increasing participation in taxation system is a feasible policy for government instead of increasing tax rate.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Alm J. & Torgler B. (2006). Culture Differences and Tax Morale in the United States and in Europe. Journal of Economic Psychology 27(2) 224-246. https://doi.org/10.1016/j.joep.2005.09.002

  • Al-Mamun A. Entebang H. Mansor S. A. Yasser Q. R. Nathan T. M. & Rahman M. A. (2014). The Impact of Demographic Factors on Tax Compliance Attitude and Behavior in Malaysia. Journal of Finance Accounting and Management 5(1) 109-124. Retrieved from https://pdfs.semanticscholar.org/675e/b518b4d13c0d8352367999a568c4fc797735.pdf

  • Andreoni J. Erard B. & Feinstein J. (1998). Tax compliance. Journal of Economic Literature 36(2) 818-860. Retrieved from https://www.jstor.org/stable/2565123

  • Bangladesh Gadget. June (2015). Retrieved 10 January 2017 from http://www.nbr.gov.bd/contents/act/24.pdf

  • Bentler P. M. & Kano Y. (1990). On the Equivalence of Factors and Components. Multivariate Behavioral Research 25(1) 67-74. https://doi.org/10.1207/s15327906mbr2501_8

  • Bobek D. D. & Hatfield R. C. (2003). An Investigation of the Theory of Planned Behavior and the Role of Moral Obligation in Tax Compliance. Behavioral Research in Accounting 15(1) 13-38. https://doi.org/10.2308/bria.2003.15.1.13

  • Burton H. A. Karlinsky S. S. & Blanthorne C. (2005). Perception of a White-Collar Crime: Tax evasion. The ATA Journal of Legal Tax Research 3(1) 35-48. https://doi.org/10.2308/jltr.2005.3.1.35

  • Chan C. W. Troutman C. S. & O’Bryan D. (2000). An Expanded Model of Taxpayer Compliance: Empirical Evidence from the United States and Hong Kong. Journal of International Accounting Auditing and Taxation 9(2) 83-103. https://doi.org/10.1016/S1061-9518(00)00027-6

  • Clotfelter C. T. (1983). Tax Evasion and Tax Rates: An Analysis of Individual Returns. The Review of Economics and Statistics 65(3) 363-373. https://doi.org/10.2307/1924181

  • Costello A.B. & Osborne J.W. (2005). Best Practices in Exploratory Factor Analysis: Four Recommendations for Getting the Most from your Analysis. Practical Assessment Research & Evaluation 10(7) 1-9. Retrieved from https://pareonline.net/pdf/v10n7.pdf

  • Fabrigar L. R. Wegener D. T. MacCallum R. C. & Strahan E. J. (1999). Evaluating the Use of Exploratory Factor Analysis in Psychological Research. Psychological Methods 4(3) 272-299. https://doi.org/10.1037//1082-989x.4.3.272

  • Fallan L. (1999). Gender Exposure to Tax Knowledge and Attitudes Towards Taxation; an Experimental Approach. Journal of Business Ethics 18(2) 173-184. Retrieved from http://www.jstor.org/stable/25074044

  • Floyd F. J. & Widaman K. F. (1995). Factor Analysis in the Development and Refinement of Clinical Assessment Instruments. Psychological Assessment 7(3) 286-299. https://doi.org/10.1037//1040-3590.7.3.286

  • Gërxhani K. & Schram A. (2006). Tax Evasion and Income Source: A Comparative Experimental Study. Journal of Economic Psychology 27(3) 402-422. https://doi.org/10.1016/j.joep.2005.08.002

  • Groenland E. A. G. & van Veldhoven G. M. (1983). Tax Evasion Behavior: A Psychological Framework. Journal of Economic Psychology 3(2) 129-144. https://doi.org/10.1016/0167-4870(83)90069-7

  • Hair J. Anderson R.E. Tatham R.L. & Black WC. (1995). Multivariate Data Analysis. 4th ed. New Jersey: Prentice-Hall Inc.

  • Hasan R. (2014). The Tendency toward Tax Evasion in Bangladesh. World Journal of Social Sciences 3(3) 149-161. Retrieved from http://www.wjsspapers.com/static/documents/October/2014/12.%20Rashedul.pdf

  • Hasan R. Mohammad N. & Alam M. F. (2017). Tax Compliance in Bangladesh - A Structural Equation Modelling Approach. American Journal of Trade and Policy 4(1) 15-22. http://dx.doi.org/10.18034/ajtp.v4i1.980

  • Hassan M. K. (2011). The shadow economy of Bangladesh : Size Estimation and Policy Implications. Transparency International Bangladesh Research Report 1-21. Retrieved from https://www.ti-bangladesh.org/research/Shadow%20Economy%20Report%20for%20Web%2011%20Jan%2011.pdf

  • Jackson B. R. & Milliron V. C. (1986). Tax Compliance Research: Findings Problems and Prospects. Journal of Accounting Literature 5(1) 125-165.

  • James S. & Alley C. (2002). Tax Compliance Self-Assessment and Tax Administration. Journal of Finance and Management in Public Service 2(2) 27-42. Retrieved from https://ore.exeter.ac.uk/repository/bitstream/handle/10036/47458/james2.pdf?sequence=1

  • Kaiser H.F. (1960). The Application of Electronic Computers to Factor Analysis. Educational and Psychological Measurement 20 141-151. https://doi.org/10.1177/001316446002000116

  • Kaiser H.F. (1970). A Second-Generation Little Jiffy. Psychometrika 35(4) 401-415. https://doi.org/10.1007/BF02291817

  • Kaiser H.F. (1974). Little Jiffy Mark IV. Educational and Psychological Measurement. 34 111-117. https://doi.org/10.1177/001316447403400115

  • Kasipillai J. (2005). A Comprehensive Guide to Malaysian Taxation under Self-Assessment System 2nd ed. Selangor: McGraw Hill

  • Kasipillai J. & Jabbar H.A. (2006). Gender and Ethnicity Differences in Tax Compliance. Asian Academy of Management Journal 11(2) 73-88. Retrieved from http://eprints.usm.my/35944/1/AAMJ_11-2-5.pdf

  • Khlif H. & Achek I. (2015). The Determinants of Tax Evasion: a Literature Review. International Journal of Law and Management 57(5) 486-497. Retrieved from https://www.springer.com/cda/content/document/cda_downloaddocument/9783319324180-c2.pdf?SGWID=0-0-45-1569685-p179931254

  • 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

  • Kong F. & Wang C. (2014). The Determinants of Tax Evasion : A Literature Review. Gdanskie Studia Azji Wschodniej 5 70-78. Retrieved from http://www.ejournals.eu/pliki/art/3141/

  • Lancaster S. Rodriguez B. Lancaster S. L. Melka S. E. & Rodriguez B. F. (2017). A Factor Analytic Comparison of Five Models of PTSD Symptoms Journal of Anxiety Disorders 23(2) 269-274. http://doi.org/10.1016/j.janxdis.2008.08.001

  • Marshall R. Smith M. & Armstrong R. W. (1997). Self-Assessment and the Tax Audit Lottery: the Australian Experience. Managerial Auditing Journal 12(1) 9-15. https://doi.org/10.1108/02686909710155957

  • McBarnet D. (2001). When Compliance is not the Solution but the Problem: From Changes in Law to Changes in Attitude. Centre for Tax System Integrity (CSTI) The Australian National University. Retrieved from https://openresearch-repository.anu.edu.au/bitstream/1885/41635/2/WP18.pdf

  • McGee R. W. & Tyler M. (2006). Tax Evasion and Ethics: a Demographic Study of 33 Countries. Researchgate Publication 1-20. https://doi.org/10.2139/ssrn.940505

  • Muibi S. O. & Sinbo O. O. (2013). Macroeconomic Determinants of Tax Revenue in Nigeria (1970-2011) 28(1) 27-35. https://doi.org/10.5829/idosi.wasj.2013.28.01.1189

  • Murphy K. R. & Davidshoter C. O. (1988). Psychological Testing: Principles and Applications. Englewood Cliffs NJ: Prentice-Hall.

  • Murphy R. (2011). The Cost of Tax Abuse: A Briefing Paper on the Cost of Tax Evasion Worldwide. The Tax Justice Network 1-20. Retrieved from https://www.taxjustice.net/wp-content/uploads/2014/04/Cost-of-Tax-Abuse-TJN-2011.pdf

  • NBR (2018). Revenue Collection up to November 2017 National Board of Revenue.

  • Obid S. N. S. (2004). The influence of penalties on taxpayers’ compliance: A comparison of the Theoretical Models. Iium Journal of Economic and Management 12(1) 1-31. Retrieved from http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/98/81

  • Palil R. (2010). Tax Knowledge and Tax Compliance Determinants in Self-Assessment System in Malaysia. A Thesis Submitted to The University of Birmingham for the Degree of Doctor of Philosophy Department of Accounting and Finance Birmingham Business School.

  • Pissarides C. A. & Weber G. (1989). An Expenditure-Based Estimate of Britain’s Black Economy. Journal of Public Economics 39(1) 17-32. https://doi.org/10.1016/0047-2727(89)90052-2

  • Riahi-Belkaoui A. (2004). Relationship between Tax Compliance Internationally and Selected Determinants of Tax Morale. Journal of International Accounting Auditing and Taxation 13(2) 135-143. https://doi.org/10.1016/j.intaccaudtax.2004.09.001

  • Richardson G. (2006). Determinants of Tax Evasion: A Cross-Country Investigation. Journal of International Accounting Auditing and Taxation 15(2) 150-169. https://doi.org/10.1016/j.intaccaudtax.2006.08.005

  • Roberts M. L (1994). An Experimental Approach to Changing Taxpayers’ Attitudes towards Fairness and Compliance via Television. The Journal of the American Taxation Association 16(1) 67-86.

  • Roshidi M. A. Mustafa H. & Asri M. (2007). The Effects of Knowledge on Tax Compliance Behaviors among Malaysian Taxpayers. Business and Information 4.

  • Saima U. & Uddin M. K. (2017). The Relationship between Budget Deficit and Public Debt in Bangladesh: A Vector Error Correction Model (VECM) Approach. Imperial Journal of Interdisciplinary Research 3(7) 623-628. Retrieved from https://www.onlinejournal.in/IJIRV3I7/103.pdf

  • Sapiei N. S. & Kasipillai J. (2013). Impacts of the Self-Assessment System for Corporate Taxpayers. American Journal of Economics 3(2) 75-81. https://doi.org/10.5923/j.economics.20130302.03

  • Sarkar S. Nodee M. Musleh M. & Reza S. M. S. (2015). VAT reform in Bangladesh : perspectives on Tax Morale. International Journal of Business and Management Study 2(2) 289-293. Retrieved from https://www.researchgate.net/profile/Mahpara_Nodee/publication/285406363_VAT_Reform_in_Bangladesh_Perspectives_on_Tax_Morale/links/565ded7f08ae1ef9298391aa.pdf

  • Sarker T. K. (2003). Improving Tax Compliance in Developing Countries via Self-Assessment Systems-What Could Bangladesh Learn from Japan. Asia-Pacific Tax Bulletin 9(6) 3-34. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=

  • Ser P. C. (2013). Determinants of Tax Non-Compliance in Malaysia (Doctoral dissertation UTAR).

  • Stevens J. (2002). Applied Multivariate Statistics for the Social Sciences. Mahwah NJ: Erlbaum.

  • Torgler B. (2003). Tax Morale Rule-Governed Behaviour and Trust. Constitutional Political Economy 14(2) 119-140. https://doi.org/10.1023/A:1023643622283

  • Torgler B. (2004). Tax Morale in Asian Countries. Journal of Asian Economics 15(2) 237-266. https://doi.org/10.1016/j.asieco.2004.02.001

  • Wahlund R. (1992). Tax Changes and Economic Behavior: The Case of Tax Evasion. Journal of Economic Psychology 13(4) 657-677. https://doi.org/10.1016/0167-4870(92)90017-2

  • Wenzel M. (2004). An Analysis of Norm Processes in Tax Compliance. Journal of Economic Psychology 25(2) 213-228. https://doi.org/10.1016/S0167-4870(02)00168-X

  • Witte A. D. & Woodbury D. F. (1985). The Effect of Tax Laws and Tax Administration on Tax Compliance: The Case of the US Individual Income Tax. National Tax Journal 38(1) 1-13.

  • Young J. C. (1994). Factors Associated with Noncompliance: Evidence from the Michigan Tax Amnesty Program. The Journal of the American Taxation Association 16(2) 82-105.

Journal information
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 292 292 8
PDF Downloads 356 356 54