The collectivistic Asian group relied more on their peers for tax assistance

The collectivistic asian group relied more on their

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The collectivistic Asian group relied more on their peers for tax assistance, and their long term orientation discouraged them from using the inefficient IRD services. Their high power distance also caused some to not interact with the IRD. Similarly, the Maori and the Pacific sample also did not interact much with the IRD because of their high regard towards authorities. Hence, in summary, collectivistic cultures that had access to peers knowledgeable in tax can lower their tax compliance costs. Long term orientation values also motivate ethnic groups to rely less on their paid accountants to further lower their compliance costs. In
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129 contrast, short term oriented and high power distance cultures would incur higher tax compliance cost. Comparatively, individualistic, low power distance and medium term oriented cultures also incur higher compliance costs, but not as high as those with short term and high power distance cultures. This is best summarised in Table 7.1 as shown on the next page. 7.6 Summary This chapter examined the accounting systems, sources of tax assistance used, perceptions of the IRD, and tax audit experiences of ethnic SME operators. The tax practitioners and business experts were able to give valuable insights as to why ethnic operators exhibited different perceptions of the IRD and some additional insights on the audit experiences. Their independent and “outside” observations corroborated the accounts of SME operators. Cultural factors, such as long term and short term orientations, individualism-collectivism, and power distance were pertinent in explaining some of the differences in the use of tax assistance, perceptions of the IRD and their audit experiences. The audit experiences also exposed the lack of financial literacy and cash management skills amongst Pacific and Maori operators. The most common tax assistance used by European, Maori and Pacific operators was their paid accountant, compared to Asians who relied more on their friends and peers. Collectivism and reducing compliance costs were important factors for the Asians’ tax assistance decision, whereas power distance was more dominant in influencing Maori and Pacific’s tax decisions. Asians rely on their paid accountants least, whereas the Europeans relied on their accountants the most. A small number of Asians and Pacific operators used the IRD as their main source of tax assistance to save on compliance costs, despite their high power distance values. Hence, it suggests that ethnic groups with high power distance values can work with tax authorities when they are given strong motivation to do so, for example to reduce their tax compliance costs. The different perceptions ethnic groups have towards the IRD suggest different approaches required to regulate them. For example, the Asian group would value faster telephone responses from the IRD to clarify tax issues. Being expedient with their telephone responses would benefit other ethnic groups and not just the Asians.
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  • Fall '16
  • tax compliance, SME Operators

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