were more compatible with tax compliance whereas for others their cultural

Were more compatible with tax compliance whereas for

This preview shows page 170 - 172 out of 241 pages.

were more compatible with tax compliance, whereas for others their cultural values posed significant barriers for effective tax compliance, especially when benchmarked against the requirements to file timely tax returns and pay their taxes on time. The influence of cultural values on ethnic operators’ compliance behaviour is summarised using Hofstede’s (2001) five cultural dimensions.
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157 High power distance Asians, Maori and Pacific viewed authorities as having significant powers to punish them for noncompliance. Instead of taking a consultative role, they assumed a subordinate role to the authority figures. They looked to the IRD for approval and direction and were receptive to the suggestions/advice given by the authority figures. Unlike low power distance Europeans, they were less inclined to question and challenge the decisions made by the authorities. Given this situation, different modes of interaction are required by the tax authorities and tax practitioners when dealing with the ethnic groups. These organisations should adopt a paternalistic role for high power distance cultures and a more consultative role for low power distance cultures, to encourage compliance. Asians and Europeans displayed higher uncertainty avoidance, were more disciplined and were motivated to undertake measures to mitigate tax compliance uncertainty, resulting in fewer tax compliance difficulties compared to the lower uncertainty avoidance Maori and Pacific groups. The Maori and Pacific samples showed less interest and discipline in their record keeping tasks and in paying their taxes on time. Given that, higher uncertainty avoidance cultures are more suited to the self assessment tax regime. Targeted assistance by providing training in record keeping, accounting and cash management skills is therefore more applicable to lower uncertainty avoidance cultures. Mid to long term time orientations resulted in more regularly updated record keeping and fewer tax payment problems for the European and Asian samples. In addition, the Asian group was frugal with their compliance costs by undertaking the record keeping process themselves, seeking tax assistance from peers, and paying their taxes on time. The short term oriented Pacific and Maori sample had more obligations towards traditions, resulting in more tax payment difficulties. They were less cost conscious as more of them relied on paid tax assistance. To assist short term oriented cultures to comply effectively, assistance with cash management skills and record keeping is needed from the tax authorities, tax practitioners and business experts. The collectivistic Asian sample had access to their families’ financial resources and peers’ tax knowledge to reduce tax compliance difficulties. However, collectivistic Pacific and Maori samples placed their group obligations over their personal interests, resulting in more tax compliance difficulties. Individualistic Europeans in this research were more self reliant and relied less on their extended families and peers for tax
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  • Fall '16
  • tax compliance, SME Operators

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