Torgler 2007 laments that tax compliance researchers have pai substantial

Torgler 2007 laments that tax compliance researchers

This preview shows page 38 - 40 out of 241 pages.

Foppa, 1986). Torgler (2007) laments that “tax compliance researchers have paid substantial attention to tax evasion and thus to the decision as to how much income to report in a tax return. But little is known about individuals’ compliance behaviour and variables such as timely filing out of the tax form and paying individual taxes on time” (p. 258). Given that, it is worthwhile researching actual tax compliance behaviour relating to filing tax returns and the timely payment of taxes, as they affect tax compliance costs. So far, the research on culture has been on students and general taxpayers. Given the importance of culture and tax compliance, the next section examines some intra-cultural research on SMEs. 2.5 Culture and tax compliance of SMEs SMEs have been recognized as heterogeneous in terms of business size, business duration and the sectors in which they operate (Collins & Jarvis, 2002; Cunningham & Lischeron, 1991; Hebert & Link, 1989). However, there is an increasing recognition of cultural diversity and its potential effects on tax attitudes. Coleman and Freeman (1994) observe that the “cultural background of small business people is so varied” (p. 355) and that attitudes towards taxes and the tax system is a product of taxpayers’ cultural background” (p. 366). Their research shows that one South African business operator practiced income smoothing to avoid attention from the tax authority. They also speculate tax attitude differences between local born Australians and migrants and conjecture that business operators from low paying and unregulated tax regimes to have different taxpaying attitudes compared to those exposed to regulated tax systems (Coleman & Freeman, 1994). However, these speculations and conjectures were made without further supporting empirical evidence. Moreover they did not specify what the tax attitude differences are between the cultural groups, to provide specific information helpful to regulatory bodies even though they claim that “a strategy which is successful with one group may completely repel another” (Coleman & Freeman, 1994, p. 355). More empirical evidence on the tax compliance behaviours of the different cultural
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25 groups is needed to increase our understanding of the impact of ethnicity and tax compliance. This limitation is partly addressed by Rothengatter (2005a, 2005b). Rothengatter (2005a, 2005b) claims that ethnicity of SME operators is important in determining their tax compliance behaviour. His focus group study reveals the differences in tax attitudes between the Asians, Greeks, Lebanese, and local born Australians, with the Asians undertaking extensive tax planning to minimise taxes. The tax attitude variations were traced to the deeply embedded social networks of collectivistic Asians, Greeks and Lebanese, which in turn influenced their tax compliance behaviours. In addition, not declaring cash jobs is not considered unethical by the collectivistic SME groups, though the local born Australian SME operators perceive the practice as morally wrong. SME operators who identify themselves as Australians are more willing to contribute towards taxes than those who do not. He
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  • Fall '16
  • tax compliance, SME Operators

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