The importance of culture in tax compliance research is further reinforced by

The importance of culture in tax compliance research

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The importance of culture in tax compliance research is further reinforced by Richardson (2005). He discovered differences between Australian and Hong Kong students concerning general tax fairness, tax rate structure, and self-interest and suggests that “it might be that cultural setting is an important factor that should be taken into account” (G. Richardson, 2005, p. 22). However, his research on students has been criticised for not providing real life perspectives of actual tax compliance behaviours (D. Ho & Wong, 2008). This is because students may gameplay (Cuccia, 1994) and were shown to undertake more risks than actual taxpayers (Gerxhani & Schram, 2006; Starmer, 1999). Unlike actual taxpayers, any tax evasion undertaken by students in experimental and survey research will not cost them or affect their reputation adversely (see section 2.3.4). Although the abovementioned cross-cultural studies indicate that country, as a generic measure of culture, does affect individuals’ tax morale and tax attitudes, they did not explore the different characteristics (Hofstede, 1980), multidimensionality (Tsakumis et al., 2007) and complexity of culture (E. Hall, 1976; Trompenaars, Hampden-Turner, &
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21 Trompenaars, 1994). Given that “culture is a multivariate concept” (Tsakumis et al., 2007, p. 132), it is imperative to study the different dimensions of culture to better understand how they might affect tax compliance decisions and perceptions. 2.4.1.1 Cultural dimensions and tax compliance To better explain the effects of culture on tax evasion perceptions, several cross-cultural studies compare collectivistic to individualistic societies. McGee et al. (2008) surveyed tertiary business students from Hong Kong and United States and finds that collectivistic Hong Kong students are more conditional in their perceptions on tax evasion compared to individualistic United States students, who view tax evasion as morally wrong. Hong Kong students justify their tax evasion perceptions based on the government’s performance whereas United States students form their judgements on moral values and less on government’s performance. They observe that Hong Kong students have tendencies to be self-righteous and are willing to compromise towards tax evasions if their expectations of their government are not met. Similarly, Chan et al. (2000) observe that collectivistic Hong Kong students are less compliant and have less favourable attitudes toward the tax system compared to individualistic United States students. These two cross-cultural studies provide some useful insights into the individualism-collectivism effects on tax perceptions. However, Oosterbeek, Sloof and van de Kuilen (2004) argue that most cross-cultural surveys and experiments contain data from only one city of each country, and that differences in outcomes may simply reflect differences across different locations rather than differences across countries. They therefore caution the generalisability of cross-cultural research findings as representative of the entire country. Hence, a more fruitful research
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  • tax compliance, SME Operators

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