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Research into the behaviors of tax payers in Uganda. A psychology perspectiveTRANSCRIPT
An application of the Theory of
Reasoned Action on Tax Compliance:
The Case of Small Business Enterprises
in Uganda
Masters’ thesis
Msc International Business and Management specializing in
International Financial Management (University of Groningen)
and Msc in Business and Economics (University of Uppsala)
Kiconco Rebecca [email protected]
Acknowledgement:
I would like to thank my supervisor Dr Bartjan Pennink for his encouragement and guidance during the writing of this thesis, I have benefited from his experience immensely. Further, I thank Dr Mark De Vires for taking the time to read through my work and give practical comments. I would like to extend my gratitude to Arthur Sserwanga, for his assistance in developing a workable idea and rendering his help in my research. Last but not least, I would like to thank my family.
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Table of contents
Contents Page
No.
ABSTRACT.................................................................................................................41.2 Problem statement.................................................................................71.3 Research question:.................................................................................8
1.1.3 Sub-questions.......................................................................................81.4 Significance...............................................................................................8
Chapter 2.................................................................................................................10Literature review..................................................................................................10
2.0 Introduction............................................................................................102.1 Presumptive income tax.....................................................................102.3 Tax compliance......................................................................................112.2 Existing theories on tax compliance.............................................122.5 Psychology in tax compliance;.........................................................142.6 The theory of reasoned action.........................................................15
2.6.1 Attitudes...............................................................................................162.6.2 Social norms.......................................................................................172.6.2.1 Subjective norms:.........................................................................182.6.3 Behavioral intention........................................................................19
2.7 Conceptual framework.......................................................................19Chapter 3.................................................................................................................21Methodology...........................................................................................................21
3.0 Introduction............................................................................................213.1 Research Design....................................................................................213.2 Survey population.................................................................................213.3 Sampling and Sample size................................................................213.4 Methods of Data Collection..............................................................223.5 Measurement of variables:...............................................................23
3.5.1 Measurement of Behavior.............................................................233.5.2 Measurement of Intention:...........................................................233.5.3 Measurement of attitude towards behavior:.........................243.5.4 Measurement of subjective norms:...........................................243.5.5 Measurement of tax compliance behavior..............................25
3.6 Demographic and practice related control variables:...........253.7 Data Processing.....................................................................................26
3.7.1 Normality:............................................................................................263.7.2 Reliability test....................................................................................26
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Chapter Four..........................................................................................................28Results.......................................................................................................................28
4.0 Introduction..............................................................................................284.0 Descriptive statistics........................................................................28
4.1.1 Sample characteristics...................................................................284.1.2 Descriptive statistics for theory variables..............................304.1.3 Correlations:.......................................................................................314.1.4 Objective 1: Predictors of Intention.........................................314.1.5 Objective 2: Predictor of tax compliance................................324.1.6 Supplement analyses.......................................................................33
Chapter five.............................................................................................................35Discussion of findings.........................................................................................35
5.0 Introduction: An Overview of Work Done...................................355.1 Discussion of Results...............................................................................35
5.1.1 Sample characteristics...................................................................355.2 Hypothesis...................................................................................................36
5.2.1 Hypothesis I........................................................................................365.2.2 Hypothesis II.......................................................................................385.2.3 Hypothesis III....................................................................................39
5.3 Supplementary analysis:....................................................................40Chapter Six..............................................................................................................41Conclusions and recommendations...............................................................41
6.0 Introduction.................................................................................................416.1 Conclusion...............................................................................................416.2 Implications and Recommendations.............................................41
6.2.1 Theoretical implications.................................................................426.2.2 Policy implications:..........................................................................42
6.3 Areas for further research................................................................426.4 limitations to the study.......................................................................43
REFERENCES:.......................................................................................................45
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ABSTRACT
There are currently few studies on tax compliance invoking the
theory of reasoned action in explaining tax compliance in a
developing country such as Uganda. Uganda still has a research
gap in the area tax compliance. Many economic and administrative
studies have been done to determine factors that influence tax
compliance in Uganda. Psychological factors are yet to be
discussed in the Ugandan context. This study went out to
investigate if the theory of reasoned action (psychology theory
made up of subjective norms and attitudes influencing intentions to
comply which in turn influence behavior in this case tax compliance
behavior) has an influence on the tax compliance behavior on
individual small business enterprises in Uganda and further to see
if the explanatory power of the theory is better than its individual
components’ explanatory power. In order to achieve this data was
collected and analyzed using SPSS 17.0 where hierarchical
multiple regression and simple regression models were used to
receive results. The findings show that the theory of reasoned
action does indeed influence tax compliance behavior and
Ugandans generally do not intend to comply with tax regulations,
they have negative attitudes towards intending to comply with their
tax obligations. However, SBEs are influenced positively by
subjective norms in their intentions to comply with their tax
obligations.
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Chapter 1If the Lord loveth a cheerful giver, how he must hate the taxpayer!
~John Andrew Holmes
1.0 Introduction:
The prevalence of poverty in developing countries demands that
these countries should improvise internal revenue generating
projects to supplement, and ultimately reduce dependence on
foreign donor funding. One such internal revenue-generating
mechanism and perhaps the most commonly used, is taxation.
Developing countries face formidable challenges in generating tax
revenue because the majority of citizens in these countries either
engage in subsistence agriculture or in small or informal sectors.
Consequently modern means of raising revenue such as income
taxes and consumption taxes play a diminishing role, given the
nature of Uganda’s economy. Low revenue collections are also
attributed to low compliance levels, difficulties in enforcement,
political interference, poor revenue management and
administration. Tax administration faces a problem of revenue
fraud in the form of smuggling, undervaluation, under declaration
of income and taxable goods, and misclassification of goods.
The tax evasion rates are high in most economies around the world
especially developing countries with Uganda being no exception.
Maital (1982) contends that tax evasion falls solidly in the free-
rider box. Further he says, the more people seek free rides and
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evade taxes, the more those who do pay have to fork over and the
greater the incentive to evade. Tax non-compliance reduces
government revenues; thus addressing non-compliance problems is
central to the development of many developing economies around
the world today. The economics of tax compliance has been
approached from many perspectives; it has been viewed as a
problem of public finance, law enforcement, organizational design,
labor supply, or ethics or a combination of these (Andreoni, Erard
and Feinstein, 1998). However, in Uganda tax compliance has
been mainly investigated and apprehended from a tax
administration or tax collector perspective. There are few empirical
findings on tax compliance using a taxpayer approach.
In Uganda, a number of Small Business Enterprises (hence forth
referred to as SBEs) remain outside the tax system through tax
non-compliance. It is easier for SBEs to remain outside the tax net
because they can remain inconspicuous to the tax administration.
Furthermore SBEs find it easier to slip out of the tax collectors’
net, because the enforcement costs would exceed the potential tax
revenue collected from the SBEs (Gauthier and Reinikka, 2001).
SBEs find it beneficial to take advantage of loopholes in the tax
system in order to minimize their tax payments (Wallace, 2002).
As a complex phenomenon, tax non-compliance can be addressed
from a variety of perspectives. Taxpayers’ stance is influenced by
many factors, including perceived fairness of the taxes, prevailing
social norms and morals, complexity of tax laws and regulations,
audit rates and penalties. Without questioning the relevance of
ethical and sociological motivations, the analysis of non-compliance
has focused on how non-compliance or evasion is deterred through
detection and sanctions (Franzoni, 1999), which approach cannot
wholly explain non-compliance among taxpayers. Many scholars
perceive tax audits as a deterrent to non-compliance.
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The foregoing offers an analytical framework for examining some
salient aspects of tax compliance in Uganda. To date much of the
studies have focused on penalties, audits and fairness as the crucial
determinants for non-compliance, but little is understood about the
personalities of tax payers. Efforts have to be directed to addresses
the psychological and sociological aspects of the tax payers in a bid
to improve compliance rather than depending on the economic,
legal and tax administrative aspect. Non-compliance is still a
complex phenomenon that cannot be eradicated by partial
diagnosis of its determinants and ignoring the role of psychology.
Psychology plays an important role in compliance, though often
ignored by public and tax policy makers.
In order to introduce psychology in tax compliance, the theory was
reasoned action was employed by two distinct studies; (Bobek and
Hatfield, 2003; Meints and Roberts, 2009). These studies however,
were both conducted in the USA.. No known study has employed
the theory of reasoned action to explain tax compliance in Uganda.
Tax compliance has taken a tax administrator/collector approach
(with little success), but TRA takes an individual tax payer based
approach. Personality has been an overlooked factor in nearly all
studies of evasion behavior (Meints and Roberts, 2009).
Consequently, the primary purpose of this study is to identify which
personality traits influence tax compliance behavior by making use
of the theory of reasoned action (hence forth referred to as TRA)
(Ajzen and Fishbein, 1975). TRA postulates that intentions to
engage in a specific behavior are determined by two social
cognitive constructs; attitudes and perceived subjective norms,
(Ajzen 1991). Intentions then predict actual behavior. In this case,
attitude is one’s personal opinion of a behavior and perceived
subjective norms refers to how one thinks significant others judge
the behavior. TRA posits that attitude and perceived subjective
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norms predict intended behavior. Previous studies have shown that
taxpayers who hold favorable attitudes toward evading taxes as
well as taxpayers who perceive evading taxes to be a normative
behavior are more likely to evade taxes (see Gilligan and
Richardson 2005; Davis et al. 2003; Wenzel 2004).
1.2 Problem statement Academic scholars have been on a quest to explain the
phenomenon of tax compliance for many years. The interesting face
of the tax non-compliance paradox is that though many theories
have been applied by scholars to explain the yet prevalent non-
compliance in developing countries; specifically an academic
literature gap exists on Uganda in terms of tax compliance. There
are currently few studies on tax compliance invoking the theory of
reasoned action in explaining tax compliance in a developing
country such as Uganda.
The theory of reasoned action (TRA) models decision processes
where people have a high degree of volitional control and make
reasoned choices among alternatives. (Parasuraman, Zeithaml and
Berry, 1985 Prior tax compliance research in developing countries
has mainly focused on the tax administration perspective using;
audit rates (Gauthier and Reinikka, 2001), tax penalties (Jackson
and Jones, 1985; Beck, Davis and Jung, 1991; Alm, Jackson and
McKee, 1992; Alm, McClelland and Schulze, 1992), tax fairness
(Torgler, 1999; Smith, 1992; Tyler and Smith, 1998; Franzoni 1999)
and tax compliance costs (Mueller, 1971). Further still, limited
research has been done in respect to the small business enterprises
perspective in Uganda, (Nabawesi, 2009, Fjeldstad, 2001). In
addition there is no available empirical research investigating tax
compliance behavior using the theory of reasoned action in
Uganda. Taking a psychological and sociological approach of the
tax payer, this study attempts to add to the tax compliance debate,
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the theory of reasoned action as a predictor of tax compliance in a
developing country context, principally focusing on Small Business
enterprises. With true audit rates averaging at one percent (or less
in some periods) in the past few decades, the real puzzle of
compliance, as Alm (1991) notes, is why people pay taxes at all.
1.3 Research question:The main research question this study seeks is to explore the
extent to which the theory of reasoned action explains variations in
tax compliance behavior among small business enterprises in
Uganda. The research question is classified under the composition
category of Thomas (2008). There are quite many parameters that
could explain the tax compliance phenomenon; however, the
literature is still incomplete. This study will explore yet another
factor categorized broadly as the theory of reasoned action and
broken down into attitudes, subjective norms and behavioral
intentions.
1.1.3 Sub-questions1. What is the influence of attitudes and subjective norms of on
behavioral intentions of taxpayers (SBEs) in Uganda?
2. What is the influence of behavioral intentions of SBEs on tax
compliance in Uganda?
3. What is the influence of subjective norms of SBEs on tax
compliance in Uganda?
4. What is the influence of attitudes of SBEs on tax compliance in
Uganda?
Sub- questions 3 and 4 will serve to compare the theory of reasoned
action explanatory variance to the individual predictors within the theory.
1.4 SignificanceThe study will extend the application and relevance of the theory of
reasoned action to a new arena of tax compliance in Uganda. Prior
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to this study, the theory of reason action has had few linkages to
tax compliance behaviours, especially in developing countries like
Uganda. This study goes out to match two areas (psychology and
management) divergent and yet commonly bound fields of
academic research. Not as much of research has maneuvered these
two areas simultaneously so it is a relatively new application.
The theory of reasoned action has been used to explain an
individual behavior with focus on developed countries. This study
will extend the application to developing countries and in
particular, Uganda. Further still, the application of the TRA will
provide new insights into variables that influence compliance in
Uganda. Furthermore this may lead to more tracks for other
developing countries to assess the impact SBEs’ have on tax
revenue collections which are further reflected in their ability of
economic stability as well as financial independence.
This study will go further to address tax academic scholars and
enrich tax literature related to developing countries; in addition it
will address tax practitioners especially the Uganda Revenue
Authority which is the tax body in Uganda giving them further
insight on how the theory of reasoned action can enrich tax
administration.
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Chapter 2
Literature review
2.0 Introduction This chapter profiles the tax system of small business enterprises in
Uganda today as a starting point for investigating the tax
compliance of SBEs. It briefly reviews the classical approaches to
tax compliance and the literature available on this field. This
chapter further gives insight on vast literature of the theory of
reasoned action and compiles a conceptual framework that will
guide the research. It also extracts research hypotheses for this
study.
2.1 Presumptive income taxPresumptive taxation was introduced in Uganda in 1997 to offer
the possibility of reducing tax evasion at low cost and broadening
the revenue base under the informal sector. (Sserwanga, 2002)
This mainly focused on taxpayers that do not keep records and are
in informal employment and whose turnover in a year is less than
50 million Uganda shillings (a presumptive tax does not apply to
persons carrying on professional services). Presumptive tax makes
very insignificant contribution to tax revenue in Uganda (about 2
percent of income tax and less than 0.5 percent of total tax) and it
has been a very difficult tax to collect. The informal sector, world
over, is difficult to tax because: Governments lack a comprehensive
list of these potential taxpayers; the administrative cost of dealing
with a sea of returns from these small taxpayers is extremely high;
and the informal sector businesses themselves keep poor accounts.
Further these small businesses are characterized by high tax
evasion levels, mainly under informal sector, high mobility rates,
high collapse rates, mainly sole proprietors, partnerships and
NGOs, generally have a negative attitude to taxation, and high
levels of illiteracy and innumeracy.
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Christian, (ND) states that a presumptive income tax (P-tax for
short) is a tax based on some measure of economic activity in lieu
of taxable income, rather than on taxable income itself. For
instance, it may be assessed on the basis of a firm's inventory of
output, of some input of the production process, or of gross sales
over a period of time. In the case of Uganda, presumptive tax is
assessed as a percentage of annual gross turnovers. In any case,
the aim of the tax authority is to estimate the taxable income of the
whole economic activity at hand. Bulutoglu (1995) classifies
presumptive taxes according to the type of measure of income used
and their objective. Common measures are production inputs,
assets, revenue, and external indicators. Bulutoglu (1995) finds
four common targets: hard-to-tax groups, whose income is not
easily observable; multinationals with transfer-pricing possibilities;
small businesses with high compliance costs; and as pointers of
likely tax evaders. As already stated, SBE’s are usually outside the
tax net as they are inconspicuous due to being small taxpayers.
According to the Ugandan tax structure a small business enterprise
is defined as one with gross turnover of 50 million Uganda shillings
or less and are assessed using a presumptive method. (Sserwanga,
2006). Mueller, (ND) asserted that few decisions made by the small
businessman have such serious or varied consequences as those
related to taxation. Inherent in any system of taxation are the
problems of compliance. Further, he states that the heart of the
problem for the small businessman it seems is the general lack of
knowledge about taxes and the inability to cope with them
effectively. Tax compliance was complicated by the general
practice of employing public accountants, public bookkeepers, and
tax specialists to prepare the accounting records and tax returns. It
was common among small businessmen to view the total costs of
these services to be the cost of tax compliance. Most small firms
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lack qualified personnel to perform bookkeeping and tax duties.
These duties are generally performed by the overworked owner, a
member of the household, or a part-time bookkeeper with little or
no formal training. (Nalukenge, 2007)
2.3 Tax complianceTax compliance is a concern of governments around the world (see
Alm and Sanchez, 1995; Feige, 1989; Frey and Weck-Hanneman,
1984). As a public finance topic, tax compliance spans the notions
of equity, efficiency, and incidence. (Andreoni, Erard and Feinstein,
1998). Wenzel (2005) contends that research on tax compliance has
been dominated by an economic analysis which frames the
taxpayer’s decision to pay or shun tax as an individual’s rational
attempt to maximize profits (see, Allingham & Sandmo, 1972).
However, traditional economic models of tax compliance, which
primarily emphasize enforcement and detection variables (see
Andreoni et al., 1998), are unable to comprehensively explain
current levels of compliance. Recent research, however, supports
the claim that non-economic social factors also influence taxpaying
behavior; for example ethics, perceived fairness, social norms and
psychological reactance (e.g., Alm, Sanchez, & DeJuan, 1995;
Cowell, 1992; Kirchler, 1999; Wenzel, 2002, 2004).
Economics researchers studying tax compliance in the United
States (U.S.) (see Andreoni et al. 1998) have called for more
attention to social (as opposed to economic) influences on tax
compliance (Bobek, Roberts and Sweeney, 2007). Economists in
particular have focused on the concept of ‘‘social norms’’ (e.g., Alm
et al., 1999; Pommerehne et al., 1994; Scholz and Pinney, 1995;
Wenzel, 2004). However, most of these economic studies Wenzel,
(2004) do not specify precisely what these social norms are instead
they model a variable that affects compliance in a manner
consistent with a strong effect from some outside social influence.
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With tax return audit rates continually declining (Schnepper,
2004), a better understanding of this important influence on tax
compliance is essential.
Baldry (1986) argues that the decision whether or not to evade is
influenced by “moral compunctions. Baldry (1987) asserts that
experimental findings show the prediction that a taxpayer will not
attempt tax evasion, as long as the expected gain is positive, cannot
be supported. However, taxpayers may be driven by moral rules
and sentiments. A taxpayer might bear moral costs if she/he does
not pay the taxes and act as a free-rider. Elffers (2000), attempts to
shows that it is a long way before a person becomes a tax evader.
He defines three steps in the staircase to tax evasion. First,
taxpayers have to be seized by a will not to comply. In a second
step, Elffers (2000) argues that not everyone with “an inclination to
dodge his taxes is able to translate his intention into action”. Many
individuals have not the opportunity or the knowledge and
resources to evade. In a third step, you can find individuals that
feel inclined not to comply and check for the opportunity to evade
taxes. Elffers (2000) further argues that this is the phase where
standard economic theory comes into play, where individuals
evaluate the expected value of evasion.
2.2 Existing theories on tax complianceDeterrence theory has been the primary theoretical framework
applied to tax compliance. This theory assumes that taxpayers
consciously weigh the pros and cons of noncompliance in light of
the probability of detection and the severity of punishment. This
model has been labeled the most pervasive tax compliance model,
(describing taxpayer expected utility as a function of tax rates,
potential penalties, and probability of audit (Allingham and Sandmo
1972). Essentially, this approach builds on Becker’s (1968) rational
economic agent approach to crime as a lottery. While this model
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has been used and modified over the decades to address tax
compliance, researchers have long struggled with its major
shortcoming; it fails to accurately predict at a macroscopic level
the very phenomena it seeks to model. More specifically, this model
predicts much lower levels of compliance than actually observed in
most industrialized nations.
In addition, two psychological theories that have been broadly
discussed in the context of tax compliance are guilt and shame.
After reviewing several well-known psychological theories, Erard
and Feinstein (1994) adapted guilt and shame to the context of tax
compliance. They argue that a taxpayer who is filling out his return
is likely to anticipate guilt while contemplating underreporting and
escaping detection, but is likely to anticipate shame when
contemplating underreporting and subsequently being caught.
However there are several draw backs to their approach; first, just
how guilt and shame enter the utility function is arbitrary and
cannot be derived from economic or psychological theory, second –
since guilt and shame are not directly observable, identification is
based totally on functional form assumptions.
Furthermore, the game theory approach was also used to explain
tax compliance, Game theory helped to create and evaluate an
analytic explanation of a particular situation. The strength of game
theory is that it makes explicit strategic aspects of social
interactions. The logic of game theory helps to simplify the
complexity of tax compliance. It outlines the range of choices
available to a player. Levi (1997) argues that to understand why
one path becomes an equilibrium path, it is important to
understand why individuals did not follow other possibilities. She
argues that game theory allows specifying the behavior that failed
to happen because it is off an equilibrium path (Greenberg, 1984;
Graetz et al., 1986; Cowell, 1990; Frey and Holler, 1998; Van Vugt
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et al., 2000) if a taxpayer does not pay the taxes, public goods will
not immediately disappear. Game theory has paid attention to the
aspects of cooperation. It helps to think about the interaction
between taxpayers themselves and the government or the tax
administration in a simple and compelling manner.
Bobek and Hatfield (2003) investigated the theory of planned
behavior and the role of moral obligation in tax compliance, where
they determined the beliefs that underlie taxpayers’ attitudes. They
found a significant explanation of tax non compliance in three
different scenarios after a series of experiments. To add to this
debate, a more recent and somewhat different approach to the
compliance issue, Feld and Frey (2007) argue that tax compliance
is the result of a “psychological tax contract” where emotional ties
and loyalties bond the taxpayer and state together to create a tax
morale that reinforces compliance.
2.5 Psychology in tax compliance;Trivedi, Shehata and Mestelman, (2005) classified the two classes
of theories in their paper as; economics-based theories which
emphasize incentives and psychology based theories which
emphasize attitudes. Economic theories of compliance suggest that
taxpayers make calculations of the economic consequences of
different compliance alternatives (such as whether or not to evade
tax), the probabilities of detection and the consequences thereof,
and then choose the alternative which maximizes their expected
after-tax return (possibly after adjustment for the desired level of
risk). In contrast, the second class of theories assumes that
psychological factors -- including moral and ethical concerns -- are
also important to taxpayers, and so taxpayers may comply even
where the risk of audit is low. Of course, some taxpayers’ behavior
may follow the economic theories while others may follow the
psychological theories, and mixtures are also possible.
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Andreoni, Erard & Feinstein, (1998) further called for more work
that was needed to be done in exploring diverse psychological,
moral and social influences on compliance behavior and integrating
these factors into economic models of compliance. In general,
incorporating non-economic motivations, such as moral preference
for honest reporting, does reduce predicted non-compliance.
Researchers have widened their lens in looking at the causes of
noncompliance. Specifically, the literature has focused on social
drivers of compliance such as social norms, individual ethics, and
how taxpayers reference themselves to others in their social
network. (Korobow and Johnson, 2007) Wenzel (2005) notes that
social factors such as “ethics and norms” might not only create
deterrents to compliance, but might also mitigate the impact of
potential penalties associated with noncompliance.
More current research has sought to modify the A&S model to
incorporate social factors. For example, Traxler (2006) modifies the
classic approach to include “tax morale” and interprets this
modification as an “internalized social norm” for tax compliance.
His results have yield higher levels of compliance given low audit
rates. Fiscal psychology has considered the effects of noneconomic
variables on tax compliance behavior over a long period of time. In
fact, Jackson & Milliron (1986) have identified tax fairness as a key
noneconomic variable in this regard. (Richardson, 2006). Recently
a new theory has been applied in tax compliance; the theory of
reasoned action.
2.6 The theory of reasoned actionIn basic terms, the theory of reasoned action (TRA) indicates that a
person’s behavior is determined by their attitude towards the
outcome of that behavior and by the opinions of the person’s social
environment. The TRA is a multi-attribute attitude model that
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predicts and explains the behavioral intentions and consequent
behavior of individuals (Ajzen and Fishbein, 1980). On the whole,
this theory explains an individual’s decision to perform or not to
perform a specific behavior such as a criminal act, enrolling in
graduate school among others. In this study, the application of TRA
is being extended to behavioral intentions of small business
enterprises’ owners towards tax compliance. The study will focus
on the owners or entrepreneurs of the SBEs as they are the
decision makers. The theory of reasoned action attempts to model
decision processes where people have a high degree of volitional
control and make reasoned choices among alternatives. (Omar &
Owusu-Frimpong, 2007). Correspondingly, tax compliance of SBEs
involves a high degree of volitional control and making reasoned
choices among compliance alternatives.
The theory of reasoned action (TRA) is a multi-attribute attitude
model that predicts and explains the behavioral intentions and
consequent behavior of consumers (Ajzen and Fishbein, 1980).
The TRA employs four constructs; attitudes, subjective norms,
intentions and behavior. The behavioral focus of this particular
study is tax compliance. The theory hypothesizes that behavior is
influenced by one’s intention to perform the behavior. Intention in
turn is influenced by one’s attitude (positive or negative evaluation
about performing the behavior) and subjective norm (perceived
social influence whether to perform the behavior). Attitude itself is
the product of beliefs and evaluations of the consequences of
performing the behavior. It can be defined as the individual’s
personal judgment about whether a specific behavior is desirable
or not based on his/her pre-existing beliefs about the desirability of
different kinds of behavior. Scholars such as Ajzen and Fishbein
(ND) put forth that attitude is best considered to be a person’s
degree of favorableness or un-favorableness with respect to a
psychological object. Similarly, subjective norm is determined by
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the beliefs of whether someone important to us expects or does not
expect us to perform the behavior, and whether we want to comply
(Lin, Chan and Wei, 2006).
Lin et al, (2006) spelt out that TRA is not without its limitations.
They stated these as three boundary conditions that can affect the
relationship between intention and behavior: (a) the degree to
which the measure of intention and the behavior criterion
corresponds with respect to the levels of specificity of action,
target, context, and time frame; (b) the stability of intentions
between time of measurement and performance of the behavior;
and (c) the degree to which carrying out the intention is under
one’s volitional control (Fishbein & Ajzen 1975). Many researchers
in attitudinal research study behavioral intention not under the
volitional control (Davis &Warshaw, 1991; Madden, Ellen, & Ajzen,
1992; Sheppard et al., 1988; Warshaw & Droge, 1986). Ajzen
(1985) addresses the issue by proposing an extension of the TRA by
incorporating perceived behavioral control as an antecedent to
behavior intention as well as behavior in a theory called the theory
of planned behavior. Below the components of the theory of
reasoned action; attitudes, subjective norms and intentions are
developed.
2.6.1 AttitudesAttitudes are defined as latent disposition or tendency to respond
with some degree of favorableness or un favorableness to a
psychological object. (Fishbein and Ajzen, 2010) Trivedi et al,
(2005) used five indicators to measure attitudes of taxpayers
namely; the importance to the tax compliance decisions of fulfilling
one’s moral and ethical obligations, funding the government,
fulfilling duties of citizen, recognition of good ethics by community,
and the presence of records (computer records or receipts).
Further they added four indicators load on this component – the
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importance to their tax compliance decisions of their perceptions
regarding having taken advantage of the system or of factors
necessary for doing so, specifically being able to brag about their
actions, knowledge of the income tax system, feeling of beating the
system, and effort required to prepare their tax return. Also
monetary considerations were added by two indicators; the
prospect of receiving a refund, and of having extra cash
consequent to their actions
Chan et al. (2000) found that taxpayer attitude had a positive
relationship with tax compliance in both Hong Kong and the U.S.
Other studies have found no association between taxpayers’
attitudes and tax compliance behavior (see, Vogel, 1974; Porcano,
1988; Antonides & Robben, 1995). However, as was suggested by
Jackson & Milliron (1986) and Richardson & Sawyer (2001), a
credible reason for this inconsistency is the multidimensional
nature of attitudes as a tax compliance variable (Richardson, 2006).
Thus the following hypothesis;
H1 Attitudes influence tax compliance behavioral intention of
taxpayers.
2.6.2 Social normsTorgler & Friedrich (2007) asked an interesting question; How,
then, do norms of compliance originate? Sociology stresses that
norms are learned through social interaction with others (Williams,
1968; Blau, 1964). The proposition that social norms are influential
in tax compliance decisions is consistent with the moral psychology
literature (Kohlberg, 1969; Rest, 1986; Bobek, et al, 2007). Social
norms are defined as ‘‘rules and standards that are understood by
members of a group, and that guide and/or constrain social
behavior without the force of law’’ (Cialdini and Trost, 1998). The
four categories of social norms identified by Cialdini and Trost are:
descriptive norms, injunctive norms, subjective norms, and
22
personal norms. For this study subjective norms are the focus
within social norms. According to Bobek et al, (2007), subjective
norms relate specifically to the expectations (injunctive norms) of
referent others (namely; family, friends, and co-workers). Further
they state that the social goal of subjective norms is to represent
the injunctive norms of those closest to an individual. Thus they aid
in building and maintaining social relationships with people whose
opinions matter the most. On the question of when will the norms
be influential they asserted that; subjective norms will influence
behavior when individuals are motivated to comply with the norms
of referent others.
Thus, individuals will comply and pay taxes as long as they believe
that compliance is a social norm (see Alm et al., 1999. Polinsky and
Shavell (2000) argue that social norms can be seen as a general
alternative to law enforcement in channeling individuals’
behaviours. The violation of social norms has consequences like
internal sanctions (guilt, remorse) or external legal and social
sanctions as gossip and ostracism. There is evidence that many
countries with similar fiscal systems have different compliance
experiences (Alm et al., 1995; for the United States see Yankelovich
et al., 1984; Vogel, 1974, for Sweden; Smith, 1986; for the United
Kingdom and De Juan et al., 1993 for Spain). The main conclusions
are that (i) individuals who comply tend to view tax evasion as
immoral; (ii) compliance is higher if moral appeals are made to the
taxpayer, (iii) individuals with tax evaders among their friends are
more likely to be evaders themselves, and (iv) compliance is
greater in societies with a stronger sense of social cohesion. Bobek
and Hatfield, (2003)
2.6.2.1 Subjective norms:Ajzen (1991) describes subjective norms as the influence of
referent others. Subjective norms refer to a person’s beliefs about
23
whether specific individuals or groups approve or disapprove of the
individual performing a specific behavior and to what extent the
individual is motivated to conform with other individuals or groups.
Hanno and Violette (1996) measured taxpayers’ beliefs about
specific referent groups namely; family members, employers,
friends and spouse. In addition to the above indicators, Trivedi et
al, (2005) added the tax preparer as well as peers of the individual.
In a review of factors affecting compliance, Jackson and Milliron
(1986) report on numerous studies that find that the compliance
behavior of one’s peers is significantly related to an individual’s
own level of compliance.
Several lines of evidence indicate that subjective norms provide
poorer prediction of intentions, compared to attitude and Perceived
behavioral control / PBC (Armitage & Conner, 2001a; Sheeran,
Trafimow, Finlay, & Norman, 2002; Trafimow & Finlay, 1996;
Langdridge, Sheeran and Connolly, 2007). However, concerning
social norms, many studies on tax evasion have found a relationship
between one’s own tax noncompliance and the perceived
noncompliance of others. (Wenzel, 2005) People who believe that
tax cheating is wide-spread among their peers or colleagues tend to
have more favorable attitudes towards tax evasion and are more
likely to cheat on taxes (De Juan, Lasheras, & Mayo, 1994; Kaplan
& Reckers, 1985; Wallschutzky, 1984; Webley, Robben, & Morris,
1988). Bobek et al (2007) in their study found subjective norms and
injunctive norms were significantly related to compliance
intentions. A striking observation was the magnitude of the effect
of subjective norms. The influence of subjective norms was much
greater than the influence of traditional economic variables on
cheating intentions.
For purposes of this study subjective norms have been broken
down in to injunctive and descriptive norms.
24
H2 subjective norms influence tax compliance behavioral intentions
of taxpayers.
2.6.3 Behavioral intentionLangdridge et al, (2007) Intention summarizes the person’s
motivation to perform a behavior and indicates the amount of time
and effort that he or she is prepared to devote in order to ensure
that an action is undertaken (Ajzen, 1991). Intention is determined
by three constructs: attitude and subjective norm and perceived
behavioral control (PBC). Attitude is the person’s overall evaluation
of what it would be like to perform a behavior (e.g., “Having a child
at some time in the future would be good/ bad) PBC is a concept of
self-efficacy and refers to people’s appraisals of the ease or
difficulty of performing the behavior (e.g., “Having a child at some
time in the future would be easy/difficult”). PBC can also influence
intention because people are unlikely to intend to perform
behaviours over which they have little control. Trivedi et al (2005)
employed two variables in respect to behavioral intention;
monetary Intent to Comply being significant.
The problematic nature of this variable is that subjects are hesitant
to admit to unethical and illegal behavior (Wenzel, 2004),
potentially contributing to the relatively low significance levels of
most compliance models. Bobek et al, (2007) In the present study,
consideration will be made to taxpayers’ compliance intentions,
rather than requesting subjects to reveal their actual tax
compliance behavior just as in the study of Bobek et al, (2007)
Behavioral intentions have been shown to be highly correlated with
actual behavior (Ajzen, 1991).
H3 taxpayers’ behavioral intentions influence their tax
compliance behavior.
25
Attitudes
Subjective Norms
Behavioral intention
Tax Compliance
Behavior
PenaltiesAuditsFairnessSocial normsGovernment responsiveness
2.7 Conceptual frameworkFrom the literature reviewed above, we develop the conceptual
framework below to guide the tax compliance investigation.
Source: Martin Fishbein and Icek Ajzen, 1975; 1980; Lin et al, 2006; Omar & Owusu-
Frimpong, 2007; Bobek and Hatfield, 2003; Meints and Roberts, 2009 and extant
literature.
There are many factors that could possibly explain tax compliance
as indicated (penalties, audits, fairness, social norms and
government responsiveness) that have been derived from existing
literature above. However for purposes of this study we are
confined to attitudes, subjective norms and behavioral intention of
SBEs.
26
Chapter 3
Methodology
3.0 IntroductionThis chapter elaborates how the study was designed and
accomplished. It provides an account of the research design,
measurement of variables, study population, sampling design, unit
of analyses, data collection methods, processing and analysis of the
data.
3.1 Research DesignA cross sectional survey design was adopted for this study. In a
cross-sectional study, a particular phenomenon is studied at a
particular period of time. Cross sectional designs are suited for
studies aimed at finding out the prevalence of a phenomenon,
situation, problem or attitude, by taking a cross-section of the
population at a given time. Cross-sectional studies are relatively
inexpensive, quick and easy to do, useful for generating and
clarifying hypothesis and can lay the ground work for decisions
about future follow up studies (Kraemer, 1994).
3.2 Survey populationThe population consisted of SBEs operating in Kampala District.
Responses were obtained from the following tax districts, i.e.
Rubaga, Makindye, Bwaise, and Nakawa. According to Uganda
Revenue Authority records, there are about 208,500 SBEs, in the
27
above tax districts. For purposes of this study, SBEs had an annual
turnover of less than fifty million Uganda shillings. (Hereby,
defined as the qualifying factor of SBEs according to Uganda’s tax
structure). This included those, which use the presumptive tax
method, those small business enterprises which opted to use the
conventional tax method and those small business enterprises
barred from using the presumptive method. (such as small law
firms, private health clinics, and audit firms). SBEs which
voluntarily use the conventional tax method are those who are
charged 30% corporate tax and keep proper books of accounts,
despite being small business enterprises.
3.3 Sampling and Sample sizeThe sample size was based on Roscoe’s (1975) rule of the thumb
for estimating the sample size. Roscoe contends that a sample size
between 30 and 500 is appropriate for most studies. Furthermore,
Saunders, Lewis and Thornhill (1997) provide a guide for minimum
sample sizes required from different sizes of the population at 95%
confidence level. They suggest a sample size of 384 respondents for
populations between 100,000 and 1,000,000. Therefore given a
population of 208,500 SBEs, in the above regions, a sample size of
384 was recommended for this study. Using the average response
rate (90%), for previous empirical studies carried out in Uganda on
the small-scale enterprises (Sserwanga 2002) the sample size was
raised to 426 elements to carter for possible non-responses. This
was calculated as follows:
90X /100 =384
90X = 38,400
X =38400/90
X = 426
Where X represents the sample size
Given a high mortality rate of SBEs, plus the fact that SBEs that
are not registered for tax purposes are not known with certainty,
28
purposive sampling was used to select a representative sample. All
respondents were given a small symbolic gift for their
participation.
3.4 Methods of Data CollectionA cross-sectional survey targeting different categories of SBEs was
carried out using interviewer-administered, structured
questionnaires. The questionnaire consisted of mainly closed-ended
questions using Likert scales. Few open-ended questions were
included in the questionnaire to ensure response clarity and
consistence. The questionnaires were prepared in English but later
translated into local languages for non-English speaking
respondents.
Given the uneven distribution of communication facilities like
telephones, internet and postal facilities etc in Uganda, telephone
interviews and mail surveys were not practical. The researcher
visited the SBE respondent, introduced herself, and requested the
respondents to complete the questionnaire. Time and effort was
dedicated to the construction and testing of the questionnaire. Pre-
tests were carried out to fine tune the instrument and to ascertain
the most appropriate way to ask the questions. Adjustments were
made to the instruments especially in respect to wording, structure
of the questions and interpretation of the words, given that most of
the scales adapted were developed outside Uganda.
3.5 Measurement of variables:In combination, attitude toward the behavior and subjective norms
lead to the formation of a behavioural intention. As a general rule,
the more favourable the attitude and subjective norm, the stronger
should be the person’s intention to perform the behavior in
question.
29
3.5.1 Measurement of BehaviorAccording to Ajzen (2006), behavior of interest is defined in terms
of its Target, Action, Context, and Time (TACT) elements. In this
case - SBEs paying their taxes in full and promptly to Uganda
Revenue Authority (URA) at the end of the financial year. Defining
the TACT elements is somewhat arbitrary. Paying is clearly part of
the action element. The URA considered the target and in full the
context, the time element referred when the behavior was
performed, and in this example it is defined as at the end of the
financial year. In Uganda’s case this is the end of June of any given
year. The financial year runs from 1st July to 30th June.
Compatibility;
No matter how the TACT elements of the behavior are defined, it is
important to observe the principle of compatibility which requires
that all other constructs (attitude, subjective norm, and intention)
be defined in terms of exactly the same elements. Thus, the attitude
compatible with this behavior was the attitude toward paying taxes
in full and promptly to Uganda Revenue Authority (URA) at the end
of the financial year, the subjective norm was the perceived social
pressure to do so. Attitude, subjective norm, and intention were
assessed directly by means of standard scaling procedures. When
developing the scales, the measures were directly compatible with
the behavior in terms of action, target, context, and time elements.
3.5.2 Measurement of Intention:A seven point likert scale ranging from extremely likely – extremely
unlikely was used to assess behavioural intention. The statement
read as follows;
I intend to pay my taxes in full and promptly to Uganda Revenue
Authority (URA) at the end of the financial year
30
Extremely unlikely: _____:_____:_____:_____:_____:_____:_____:
extremely likely
3.5.3 Measurement of attitude towards behavior:The criterion for item selection has to do with the qualitative
aspects of evaluation represented by the adjective scales. Attitude
toward a behavior was defined as a person’s overall evaluation of
performing the behavior in question. However, empirical research
has shown that overall evaluation often contains two separable
components. One component is instrumental in nature, represented
by such adjective pairs as valuable — worthless, and harmful —
beneficial. The second component has a more experiential quality
and is reflected in such scales as pleasant — unpleasant and
enjoyable — un-enjoyable. The study used the former scale as it is
more applicable given the nature of the study. The measures took
the following form as the owner of the SBE responding;
For me, paying taxes in full and promptly to Uganda Revenue
Authority (URA) at the end of the financial year is
Good: _____:_____:_____:_____:_____:_____:_____: bad
3.5.4 Measurement of subjective norms:Several questions were formulated depending on the social
environment of the SBEs and thus questions were formed given the
answers provided as to whose opinions they value. These included;
spouses, family, friends, and fellow SBE owners among others.
They took the following format.
The people in my life whose opinions I value would
Approve: _____:_____:_____:_____:_____:_____:_____: disapprove
Of my paying taxes in full and promptly to Uganda Revenue
Authority (URA) at the end of the financial year
However, responses to such items were often found to have low
variability because important others were generally perceived to
31
approve of desirable behaviours and disapprove of undesirable
behaviours. To alleviate this problem, it was recommended that the
initial set of items also include questions designed to capture
descriptive norms, i.e., whether important others themselves
performed the behavior in question. This study captured this aspect
by posing the following types of questions.
Most people who are important to me pay their taxes in full
and promptly to Uganda Revenue Authority (URA) at the end of the
financial year
Completely true: _____:_____:_____:_____:_____:_____:_____:
completely false
Many people like me pay their taxes in full and promptly to Uganda
Revenue Authority (URA) at the end of the financial year
Extremely unlikely: _____:_____:_____:_____:_____:_____:_____:
extremely likely
3.5.5 Measurement of tax compliance behavior Tax compliance was measured basing on the four items from
Wenzel, (2001) which include; non-lodgments, tax arrears, pay
income and promptness. To establish non-lodgment; respondents
were asked if they had made attempts to avoid taxes by not
declaring at all. Tax arrears was measured by inquiring from the
respondent if they had any outstanding taxes un paid, while pay
income; as measured by establishing whether the respondent had
attempted to under declare taxes. Lastly promptness was measure
by inquiring from the respondents if they had ever delayed to pay
taxes beyond the stipulated time.
3.6 Demographic and practice related control variables: In addition, we control for demographic factors such as age,
gender, education, marital status. As regards age, we assume that
older people who have acquired more social capital (Tittle, 1980;
32
Hanno & Violette, 1996) may feel a stronger attachment to the
community, which might in turn induce additional restrictions that
lead to a positive correlation between age and tax compliance
behavior. (Pommerehne and Weck- Hannemann, 1996). Tittle
(1980) observed that younger taxpayers were more risk-seeking,
were less sensitive to penalties, and also reflected the social and
psychological differences related to the period in which they were
raised. (Richardson, 2006) Prior studies have found a positive
association between age and tax compliance behavior (e.g., Vogel,
1974; Tittle, 1980). Gender is another important variable
Moreover, not only has social psychological research suggested
that women are more compliant and less self-reliant than men (e.g.,
Tittle, 1980).
Prior studies have shown a positive association between gender
and tax compliance (Vogel, 1974; Spicer and Becker, 1980; Tittle,
1980; Spicer and Hero, 1985; Baldry, 1987;, Mason & Calvin, 1978;
Hanno & Violette, 1996). Education represents an additional key
tax compliance variable. Jackson & Milliron (1986) found that
education has two important elements: the general degree of fiscal
knowledge, and the specific degree of knowledge regarding tax
evasion opportunities. They argue that enhancing the level of
general fiscal knowledge improves tax compliance by means of
more positive perceptions of taxation, while increased knowledge
of tax evasion opportunities has a negative influence on tax
compliance as it assists noncompliance.
3.7 Data Processing
3.7.1 Normality:A total of 400 questionnaires were collected of data to be analyzed.
The data collected was coded, and analyzed using of the SPSS 17.0
statistical package. Time and effort was dedicated to data cleaning
in order to minimize errors in the data. After controlling for
33
outliers, data based on 394 respondents was used. Despite the fact
that almost all the scales used in this research are adapted from
earlier works, with high reliability and validate rankings, these
scales were tested for reliability, because they were applied a new
environment, where they have never been used. First the data was
tested for normality using histograms and the Q-Q Plots (See
appendix II). Kolmogorov-Smirnov and the Shapiro-Wilk tests were
used to check whether the distribution as a whole deviates from a
comparable normal distribution. The non-significance level being
P>0.05 implying the distribution of the sample is not significantly
different from a normal distribution and therefore probably normal.
Results are below. The results show a probable normal distribution.
Table: 1
Kolmogorov-Smirnov and the Shapiro-Wilk testTests of Normality
Kolmogorov-Smirnova Shapiro-Wilk
Variable df Sig. Variable df Sig.Attitudes 400 .000 Attitudes 400 .000
Subjective norms
400 .021 Subjective norms 400 .044
Intentions 400 .000 Intentions 400 .000
Tax compliance
400 .000 Tax compliance 400 .000
a. Lilliefors Significance Correction
3.7.2 Reliability testThe questionnaire scales were tested for their reliability. One of the
key aspects of reliability is the scale’s internal consistency.
Reliability tests ensure that measurements consistently reflect the
construct that it is measuring. One of the most commonly used
indicators of internal consistency is Cronbach’s alpha co-efficient.
Kline (1999) notes that although the generally accepted value is 0.8
for cognitive tests, ability tests have a cut-off point of 0.7. He goes
on to say that when dealing with psychological constructs; values
34
below even 0.7 can realistically be expected because of the
diversity of the constructs being measured. However Cortina
(1993) notes that the value of alpha depends on the number of
items on the scale as the top half of the alpha equation includes the
number of items squared. With the above in mind, the researcher
followed Pallant, (2005) assertion that short scales with around ten
items, can have low Cronbach’s alpha values from 0.5.
The negatively worded questions (ATT; 3, 5, 6, 7, 8, 9, 10, 11 and
INT; 3, 5, 6, 8, 11, 12- see appendix III)’s scales were reversed
before checking the reliability, (scales 1-7 were changed to 7-1 in
the reverse order) in order to reduce response bias. Further the
Cronbach’s alpha when item deleted was employed and deleted the
following items from the scales. On the scale of attitudes, items 3,
11 and 13 were deleted. On the intentions scale, items 5, 6, 10 and
12 were deleted. Whereas on the subjective and descriptive scales
none of the items was deleted, on the tax compliance scale, 1, 6, 8
and 11 had to be deleted. (See appendix III) The reasons for
eliminating these items could include reasons such as; they are
factual, they are evaluatively ambiguous or they were irrelevant as
indicated by failure to correlate with the total scale score. The
Cronbach’s alpha is thus reflected in table 2.
Table 2:
Reliability test statistics
Variable Cronbach’s alpha
Cronbach’s alpha based on standardized items
No of items
Attitudes 0.625 0.639 10
Subjective norms
0.769 0.760 5
Intentions 0.614 0.664 8
Descriptive norms
0.620 0.628 5
Tax 0.602 0.612 6
35
compliance
36
Chapter Four
Results
4.0 IntroductionThis chapter presents the study findings. First, the researcher
presents a description statistics of the small business taxpayers in
the sample. The second part comprises of explanatory component
of the study. In this section we present the results of the
correlation and regression analysis. In this analysis we test the
hypotheses as stated in Chapter 2. The Pearson coefficient was
used to determine the correlation between the TRA variables. For
objective 1 of the study, a model employing hierarchical multiple
linear regression analysis was used to assess the influence of
attitudes and subjective norms on behavioural intention of SBEs
taxpayers in Uganda. In this model, measures of attitude and
subjective norm served as the independent variables, with intention
being the dependent variable.
The second objective was also analysed using a simple linear
regression to assess the influence of behavioural intentions of SBEs
on tax compliance in Uganda. In this model, behavioural intentions
are the independent variable and tax compliance behaviour is the
dependent. To further analyze the data, the researcher constructed
two more simple linear regressions, one having attitudes as the
independent variable and tax compliance behaviour as the
dependent and the second having subjective norms as the
independent and the former as the dependent. This was to assess
the extent of the relevance of the theory to explain tax compliance
behaviour in comparison to the two individual measurements of
attitudes and subjective norms.
37
4.0 Descriptive statistics
4.1.1 Sample characteristicsAs illustrated below, about 46% of the respondents in the sample
were female, while males contribute the majority at 53% of the
sample. Owing to social, cultural, economic and psychological
factors, males are generally more represented in the business
sector than females. The average age of the entrepreneurs in the
sample was about 31 years. The youngest respondent was 16 years,
while the oldest was 64 years. The majority of the respondents are
in the 26-35 yeas age brackets and about 86% of the entrepreneurs
were 45 years or younger. About 47% of the respondents were
married and another sizeable category 31% of the respondents
were single as exhibited in table 3.
By and large, the majority (about 94%) of the respondents in this
sample had received some formal education, while about 6% of the
respondents had never received any form of education; this implies
that on the whole, the majority of the entrepreneurs in this sample
were educated.
Table 3Demographic related characteristics of respondentsCharacteristic Small Business Enterprises
Gender Female (%) 186(46.5) Male (%) 214(53.5) Missing (%) 0(0)
Age group 16-25(%) 84(21.0) 26-35(%) 157(39.3) 36-45(%) 104(26.0) 46-55(%) 37(9.3) 55-65(%) 18(4.5)
Marital status Single (%) 125(31.3) Married (%) 187(46.8) Living together (%) 64(16.0) Divorced/ Separated (%) 14(3.5)
38
Widow/Widower (%) 10(2.5)
Education levels Uneducated (%) 24(6.0) Primary level (%) 43(10.8) O’level (%) 70(17.5) A’ level (%) 61(15.3) Vocational certificate (%) 40(10.0) Diploma (%) 77(19.3) Bachelor’s degree (%) 74(18.5) Master’s degree (%) 11(2.8)
Despite the fact that our population consisted of small business
enterprises, we went further to profile the respondents according
to size using their annual turnover. We used the annual turnover,
because it’s the basis for levying taxes from small business
enterprises. The very Small business enterprises with an annual
turnover between 500,000 and - 5,000,000 Uganda shillings (1
Euro approximately = 2700 Uganda Shillings) dominated the
sample (62%) and about 4.3% of the respondents could not tell
their annual turnover because they did not have any business
records.
In Uganda, tax payers are required by law to file a self-assessment
tax return annually. Respondents were asked to indicate the
number years in which they ha filed a self-assessment tax return.
The majority of the respondents (45.25%) had never filed a self-
assessment tax return with the Uganda Revenue Authority, the tax
collection body. For the respondents who file self assessment tax
returns with Uganda Revenue Authority, we also interested to
know who prepares their tax returns. As exhibited below, the
majority of the respondents (89.2%) prepared their own tax
returns, while about 10.8% of the respondents hire tax experts to
prepare the tax returns.
Table 4Practice related characteristics of respondents
Characteristics Small Business enterprises
39
Size of the enterprise (UGX) 500,000-5,000,000 (%) 247(61.8) 5,000,001-25,000,000 (%) 109(27.3) 25,000,000-50,000,001 (%) 27(6.8) Do not know (%) 17(4.3)
Longevity of filing tax returns Never filed (%) 181(45.3) 1-5 yrs (%) 141(35.3) 6-10yrs (%) 47(11.8) 11-15yrs (%) 17(4.3) 16-20yrs (%) 10(2.5) More than 20yrs (%) 4(1.0)
Tax return preparation Tax preparer (%) 175(43.8) Tax expert (%) 51(12.8) Missing (%) 174(43.5)
4.1.2 Descriptive statistics for theory variablesTable 5 summarizes the means and standards deviation of the TRA
variables. The mean behavioural intention score was 5.36
(SD±0.804), scores here ranged from 3.55 – 6.49. The mean score
of the measure of attitudes was 3.96 (SD±0.924) and interestingly
both the highest and lowest mean scores 1.95 and 5.57 had the
lowest standard deviation. For subjective norms the mean score
was 3.75 (SD±0.637) ranging from 2.36 to 5.02. The mean
response to the tax compliance behavior was 2.61 (SD±0.777),
reflected by the mean range of 1.74-3.75. (See Appendix 1)
Table 5:Descriptive statistics for the theory of reasoned action variables
Variable Mean
Std. Deviation
Attitudes 3.98 0.924Intentions 5.36 0.805Tax compliance behavior 2.61 0.777Subjective norms 3.75 0.637
40
4.1.3 Correlations:All correlations between the theory variables were significant
(P<0.01). Table 6 describes the correlation between the theory
variables. Attitudes were negatively correlated with intentions,
subjective norms (r=-0.319, r=-0.111, all at P<0.01) respectively,
positively correlated with tax compliance (r=0.143, at P<0.01).
There was a significant negative correlation between the intention
and tax compliance (r=-0.373, at P<0.01 respectively) and a
significant positive correlation with subjective norms (r=0.199 at
P<0.01).
Table 6Correlation among the theory of reasoned action variablesVariable 1 2 3 4
1. Attitudes - -0.319**
0.143** -0.111*
2. Intentions - -0.373** 0.199**
3.Taxcompliance - -0.179**
4. Subjective norms
-
**. Correlations are significant at the 0.01 level (2-tailed).
However one cannot test hypotheses using bivariate correlations,
since these correlations may be influenced by other variables, a
phenomenon also known as the third variable problem (Field,
2005). To control for such third variable problems, one needs to
perform regression analysis.
4.1.4 Objective 1: Predictors of Intention
A multiple regression model I was constructed to assess the ability
of attitude and subjective norms to predict intention. Table 7
describes the results of the regression analyses. In this model, the
utility of the TRA variables in explaining SBEs intention to pay or
not pay their taxes was determined using the above constructs. As
can be seen, a significant model emerged (β= -0.216, p < .001) for
measure of attitudes and (β = 0.248, p < .001) for the measure of
subjective norms. Adjusted R square is 0.107 or 10.7%, therefore
41
attitudes and subjective norms account for 10.7% change in tax
payers intentions to comply with tax laws and regulations, note
however that both are predictors are significant. The question here
is how much unique explanatory variance is attributable to each of
the predictors? The shared prediction is accounted for in the
difference between the adjusted r square and the r square (.112 –
107). The multiple regressions show that subjective norms provide
a larger independent contribution to the prediction of intentions
than attitudes. This is reflected in the betas.
Table 7Regression resultsPredictors’ Unstandardized
Coefficients (β) Standard errorSig (p)
Model I(R square = .112)(Adjusted r sq =.107)Attitudes -0.216* 0.040 .000Subjective norms 0.248* 0.056
.000
*P < .001Dependent variable; intentionsIndependent variable; attitudes, subjective norms
4.1.5 Objective 2: Predictor of tax complianceIn this second step of the analysis, the aim is to explain tax
compliance behavior among small business enterprises. In line with
the theory of reasoned action, at this level, the researcher used
intentions to predict tax compliance and therefore this model II
employs a simple linear regression. The dependent variable in this
case is tax compliance behavior and the independent being
intentions this time. This model was also statistically significant (β
= -0.412, p < .001) for the measure of intentions. This model
explained 15.9% (adjusted r square) of the variance in tax
compliance behavior. Results are displayed in table 8.
42
Table 8
Predictor Unstandardized Coefficients (β) Standard error
Sig (p)Model II
(R square = .161)(Adjusted r sq =.159) Intentions -0.412* 0.048
.000
*P < .001Dependent variable; tax complianceIndependent variable; intentions
4.1.6 Supplement analysesObjective 3 & 4:
Subjective norms and Attitudes predicting tax compliance
independently.
The models III and IV were used to predict tax compliance in
relation to subjective norms and attitudes respectively. One was a
significant predictor that is subjective norms (β = -0.234, p <
0.001) with adjusted r square of 0.035. Thus subjective norms
alone can explain 3.5% of the change in tax compliance. Whereas
attitudes was not significant (β = 0.119, p > 001) with adjusted r
square being 0.017 explaining only 1.7% of the variance in tax
compliance behavior. It is interesting to note the difference in the
adjusted r square between the model 1 and II (the theory of TRA)
and using models III and IV in explaining tax compliance behavior
(Supplement analysis). The results for models III and IV are
reflected in table 9.
Table 9 Predictor Unstandardized
Coefficients (β) Standard errorSig (p)
43
Model III(R square = .038)(Adjusted r sq =.035)Subjective norms -0.234* .060 .000
Model IV(R square = .019)(Adjusted r sq =.017)Attitudes 0.119 .043 .006
*P < .001Dependent variable; tax complianceIndependent variables; subjective norms (model III); attitudes (model IV)
The table below shows the contribution of the control variables in
explaining tax compliance. As can been seen only one of the
predictors is significant. It is also quite interesting. This is marital
status. This means marital status can determine whether SBE
owners take the risk to evade taxes
Table 10Regression results for control variablesPredictor Unstandardized
Coefficients (β) standard error sig (p)
Age -.011 .004 .013Marital status .161* .044
.000Gender .101 .072
.164Highest level of education -.029 .019 .136Gross turnover Income -.017 .063
.788
*P < .001Dependent variable; tax complianceIndependent variable; Age, marital status, gender, highest level of education, gross turnover
44
Chapter five
Discussion of findings
5.0 Introduction: An Overview of Work Done
The major objective of this study was to investigate the extent to
which the theory of reasoned action explains variations in tax
compliance behavior among small business enterprises in Uganda.
In this study, a distinction was made between the components of
the theory of reasoned action and general factors within the theory
that have been used in literature to explain tax compliance before.
TRA variables included; attitudes, subjective norms, behavioral
intentions and tax compliance behavior. Employing hierarchical
multiple regression as well as simple linear regression, the study
predicted the extent to which the theory (TRA) explains variance in
tax compliance behavior. Further supplementary analysis was
made to compare the explanatory variance difference of tax
compliance between the TRA and individual predictors of attitudes
and subjective norms.
5.1 Discussion of Results
The findings discussed in this chapter are presented in Chapter
four, starting with the descriptive statistics, correlations, multiple
regression analysis and finally the simple linear regressions. The
main objective of this chapter is to attach meaning to the study
findings within the study context and tax compliance behavioral
literature.
5.1.1 Sample characteristics
45
The gender-business statistics are close to the findings of Walter et
al. (2003; 2004) and Sserwanga (2010) in Uganda and Krauss
(2003) in Zimbabwe and South Africa, where female participation
in entrepreneurship was found to be lower than male participation.
The age findings imply that in Uganda, the young people are the
most active in business related sectors. The findings are consistent
with the findings of Sserwanga (2010) who reported an average
age of 30 years and 84% of the respondents were 45 years or
younger in his entrepreneurial quality study. The size of the
business was measured using turnover. The findings are consistent
with the findings of Sserwanga (2010), whose sample of
entrepreneurs in Uganda consisted of 64% micro enterprises he
makes a similar conclusion with about of the enterprises in his
sample labeled. It’s important to note that Sserwanga (2010) used
the number of persons employed, while this study based annual
turnover to measure firm size, coming up with consistent results. In
addition Snyder (2000) used number of employees to classify
Ugandan firms into respective sizes and came to a similar
conclusion about small and medium enterprises, labeling them
vibrant, fragile and underdeveloped.
5.2 Hypothesis The tax compliance prediction models disclose both varied and
interesting results about the hypotheses developed in Chapter two.
The statistical analysis in the paper mostly confirmed the theory.
The theory was particularly effective in explaining actual
compliance behavior. The theory of reasoned action explains about
10.7% of the variation in tax compliance in Uganda SBEs. It is
therefore important to note however that there are other factors
that explain 89.3% (i.e. the difference between 100% and what TRA
explains) tax compliance. These factors are likely to include; audit
rates, penalties, tax compliance costs, tax payer ethics, tax
46
fairness, and social norms among others (Alm, Sanchez, and
DeJuan, 1995; Cowell, 1992; Kirchler, 1999; Wenzel, 2002, 2004).
5.2.1 H1 - tax payers’ attitudes influence their tax compliance behavioral intentionIt has been shown in the preceding chapter using multiple
regressions that attitudes influence behavioral intentions . Note
however that the two have a significant negative correlation which
is later reflected in the beta of the regression. The results confirm
our hypothesis Further the relationship established by the negative
β means that a positive change in attitudes will result in a negative
change in behavioral intentions and vice versa. Implying a
percentage increase in attitudes will lead to 21.6% decrease in tax
compliance. However since attitudes are not a dichotomous
variable then we take this explanation in a different sense. This
then implies that Ugandan SBE owners generally have a negative
attitude towards intentions to comply with tax regulations and
laws.
The interesting question here would be why do SBEs have a
negative attitude towards paying tax? During the interviews
conducted, the SBE owners by and large said that the government
is corrupt and therefore they see no need why they should pay
more taxes and yet they don’t benefit from them. This shows that
taxpayers are normally sensitive to the way government uses tax
revenues. Taxes are supposed to be used to construct
infrastructure and provide social services to the public however,
the SBEs do not see the results of their efforts to pay tax. Taxes
therefore paid by individuals can be interpreted as the price paid
for governments’ positive action. literature and empirical findings
attest to this when Cummings, Martinez-Vazquez, McKee and
Torgler, (2004) found in South Africa and Botswana that
perceptions of the government as being corrupt will reduce the
47
willingness to comply with taxes. A higher trust of the population
might tend to increase taxpayers positive attitudes and
commitment to the tax payment which finally has a positive effect
on tax compliance. (Smith, 1992) Another reason could be the wide
spread tax evasion evident in the country. Literature explains this
as; people who believe that tax cheating is wide-spread among
their peers or colleagues tend to have more favourable attitudes
towards tax evasion and are more likely to cheat on taxes (See De
Juan, Lasheras, & Mayo, 1994; Kaplan & Reckers, 1985;
Wallschutzky, 1984; Webley, Robben, & Morris, 1988).
From the analysis, we further find that subjective norms have a
greater influence on intention than attitudes. This is not in
agreement with previous TRA literature which reports that attitude
has a stronger influence on intention than subjective norms. The
role of attitude and social norms in explaining intentions however
is contingent upon the behavior under investigation. (Khanna,
Kavookjian, Scott, Kamal, Miller and Neal, 2009). From this we
deduce that in tax compliance studies attitudes generally explain
intentions to a greater extent than subjective norms. Literature
relates that the contribution of attitudes, subjective norms to the
prediction of intentions is expected to vary not only depending on
behavior under study but also from one group of individuals to
another. The intentions of some populations may be affected mostly
by attitudes and less so by subjective norms. (Ajzen and Fishbein,
2004) It is possible that in the Ugandan population, subjective
norms are a more important consideration to intentions to comply
decisions in relation to attitudes. The negative β though makes it an
interesting finding, not only are the SBEs in Uganda having a
negative attitude towards intending to pay their tax but subjective
norms are also the bigger psychological consideration than
personal beliefs or attitudes.
48
Existing literature further indicates that to stimulate behavioural
intention, a favourable attitude needs to be formed. The more
favourable is the attitude, the stronger is the behavioural intention,
and the more likely is the performance of the behavior. (Ramayah,
Rouibah, Gopi and Rangel, 2009) This could explain further why
the regression results reflect a negative relationship between
intention and tax compliance. It could have originated from the
influence of the negative relationship with attitudes. We should
also bear in mind that all the theory of reasoned action variables
are not dichotomous; generally we deduce from the findings that
intentions too have a negative relationship with tax compliance.
This will be explained further in the discussion.
5.2.2 H2 - taxpayers’ subjective norms influence their tax compliance behavioral intentionsThe model I multiple regression in the preceding chapter
established that subjective norms do influence tax compliance
behavioral intentions. To add to this, a significant positive
correlation of .199 resulted between subjective norms with
behavioral intentions. This means that a positive change in
subjective norms will result in a positive change in tax compliance
behavioral intentions. This was further reflected in a positive β of
0.248, meaning that a percentage increase in subjective norms will
lead to a 24.8% increase in tax compliance behavioral intentions.
Note however, the dichotomous nature of the subjective norm
variable. This means that generally, Ugandan SBEs owners’
families, friends, peers and other parameters in their social
environment influence them positively to intend to pay their taxes.
This finding is in line with Fishbein and Ajzen (2010) who found
that other things being equal, the stronger the perceived social
pressure, the more likely it is that an intention to perform the
behavior will be formed. The direct positive relationship of
49
subjective norm to intention is in line with prior research
conducted by Fishbein and Ajzen (1975), Taylor and Todd (1995),
Mathieson (1991), Bhattacherjee (2000), Ajzen (1991), Ajzen
(2002), Ramayah et al. (2002), Ma’ruf et al. (2003), Eri (2004), May
(2005), Athiyaman (2002), and Gopi and Ramayah (2007). Yet
again, the question to ask is why SBE owners are influenced
positively by their peers, friends and families to conform to tax
regulations and laws? This could be attributed to the cultural set up
of Uganda. Uganda is generally has a communal background,
generally collective in nature, where people live in societies from
birth onwards are integrated into strong, cohesive in-groups, often
extended families which continue protecting them in exchange for
unquestioning loyalty. So positive influence from the society
members are reflected by individuals. Thus in Uganda, society
influences SBEs positively in terms of intentions to comply with the
tax laws. This study will add to the not so vast literature on
subjective norms and tax compliance as it broke them down to
injunctive and descriptive.
5.2.3 H3 taxpayers’ behavioral intentions influence their tax compliance behaviorEagly and Chaiken (1993), said that the fact that I am capable of
performing a behavior does not necessarily, imply that I will do it.
To put it in another way; the fact that one intends to do something
doesn’t imply that they will do it. This will be reflected in the
discussion below about tax compliance of SBEs in the Ugandan
context.
Hypothesis 3 was confirmed by our results. Behavioral intentions
influence tax compliance behavior of SBEs. A negative correlation
was found between the two variables, it was significant and further
reflected in the regression by the β of 0.401. This implies that a
positive change in intentions leads to negative change in tax
compliance behavior. Recollect the dichotomous nature of our
50
variables, a percentage increase in behavioral intentions will lead
to a 40.1% reduction in tax compliance. This is an interesting
finding for Uganda Revenue Authority and for research purposes.
The above finding implies that on the whole, Ugandan SBEs owners
don’t intend to comply with tax regulations and laws. Applicable
reasons here could be ones mentioned before that have to do with
SBE owners’ attitudes in general. As was already mentioned, the
more favourable the attitude is, the stronger the behavioural
intention, and the more likely the performance of the behavior.
(Ramayah, Rouibah, Gopi and Rangel, 2009), and the reverse could
apply in Uganda’s situation.
Another interesting finding was that intentions explain 15.9% of the
variance in tax compliance. This is quite substantial; however we
must acknowledge that there are other factors that influence tax
compliance too. This could make up the extra 84.1% (100-15.9)
percentage. It is further a significant predictor and fitted in our
model well. Other factors that literature and empirical findings
have come up with include culture (Cummings, Martinez-Vazquez,
McKee and Torgler, 2004), audit rates, penalties, fairness, tax and
admistration, among others (Alm, Sanchez, & DeJuan, 1995;
Cowell, 1992; Kirchler, 1999; Wenzel, 2002, 2004). These would
provide a more interesting study if combined.
5.3 Supplementary analysis:This part of discussion will focus on objectives 3 and 4 of the
preceding chapter. The researcher included this part of the study
to establish whether attitudes or subjective norms could
individually explain tax compliance better than the theory of
reasoned action. As can be inferred from the table 9, attitudes
explain 1.7% of variance in tax compliance behavior. Another
interesting and yet unexpected finding given the above discussion
was that attitudes scored a positive β of 0.119. This implies that a
percentage increase in attitudes will lead to a 11.9% increase in tax
51
Attitudes
Subjective norms
Intentions
Tax complian
ceBehavior
-0.216*
0.248*
-0.412*
-0.234*
0.119
compliance; therefore generally Ugandan SBEs have positive
attitudes towards tax compliance. Thus independently, without the
theory of reasoned action, attitudes of SBEs towards tax are
positive.
The subjective norms could explain only 3.5% of the variance in tax
compliance. Interestingly and also unexpectedly, subjective norms
have a negative influence on tax compliance of SBEs in Uganda.
This is reflected by the β coefficient of 0.234, therefore a
percentage increase in subjective norms will lead to a 23.4% drop
in tax compliance of SBEs. This implies that Ugandan SBEs are
influenced negatively by subjective norms when complying with tax
regulations and laws. Note however that the theory doesn’t
examine attitudes or subjective norms towards tax compliance
directly but uses the intervening variable of intentions.
So the framework comes out as follows after the analysis.
52
Chapter Six
Conclusions and recommendations
6.0 Introduction
The major objective of this study was to investigate the extent to
which the theory of reasoned action can explain variance in tax
compliance behavior among SBEs in Uganda. This objective was
further broken down into four sub questions; the influence of
attitudes and subjective norms of on behavioral intentions of
taxpayers (SBEs) in Uganda; the influence of behavioral intentions
of SBEs on tax compliance in Uganda; the influence of subjective
norms of SBEs on tax compliance in Uganda and finally; the
influence of attitudes of SBEs on tax compliance in Uganda. The
study was grounded in the theory of reasoned action and
supplementary analysis was done on exterior the theory.
6.1 ConclusionThe study established that the theory of reasoned action indeed
provides insight on the tax compliance behavior of SBEs. Not only
did the study ascertain the extent to which TRA influences tax
compliance but also ascertained the kind of relationship/ influence
it has on tax compliance behavior of SBEs in Uganda. The findings
provide evidence for the negative attitudes SBEs have on intentions
to comply with tax regulations and the extent to which these
attitudes can affect SBEs behavior. Further the findings also
illustrated that subjective norms influence SBEs tax compliance
intentions in a positive manner. However the over all appearance of
these intentions lead to a negative effect on tax compliance
behavior of these SBEs. Thus on the whole, SBEs appear not to
intend to pay their taxes. Possible reasons were also explained in
chapter five as to why these results would appear so. Subsequent
analysis exterior of TRA however provided surprising results by
53
SBEs having positive attitudes towards paying their taxes as well
as being influenced negatively by subjective norms.
6.2 Implications and RecommendationsThe results of this study are endowed with theoretical, and policy
implications. These implications are discussed below and pertinent
recommendations proposed. We nevertheless note that many of the
recommendations are cut across the categories, which calls for an
integrated approach when dealing with tax compliance issues.
6.2.1 Theoretical implicationsThe theory of reasoned action has been used to explain behavior in
numerous situations in psychology. This study has used this theory
not only in a new setting but also in a new geographical, economic
and administrative setting; Uganda. Therefore this implies that not
only is this theory relevant in explaining psychological social issues
but it is also relevant in explaining economic behavior of
individuals namely; tax compliance. In addition this theory has
provided an explanatory difference in its individual predictors
(attitudes and subjective norms) and the structural predictors of
the theory (attitudes and subjective norms leading to intentions and
intentions leading to behavior). This difference thus creates a
lacuna in research that is worth exploring. So the question that
would arise is where does this difference come from and why? A
recommendation here would be a broader study into this area to
answer the above questions.
6.2.2 Policy implications:The research was carried out with certain audiences in mind;
academicians, the Uganda Revenue Authority, and general
audiences interested in tax compliance issues, prior to this study,
none of the above predictors were used in assessing the tax
54
environment in Uganda. It has been established that generally
SBEs don’t intend to pay their taxes. This could have been an
influence of the negative attitudes they have. The researcher
recommends that attitudes of SBEs should be taken as a serious
consideration in tax administration. Tax administration should
come up with policy measure that will improve the SBES intentions
to apply tax SBEs make up the biggest population of businesses in
Uganda and though they don’t contribute the biggest percentage of
taxes, if they indeed refrained from paying their taxes, the effect
would be felt by the economy at large. This would fall to the URA to
establish why attitudes of SBEs are negative.
6.3 Areas for further researchThe above recommendations bring us to areas for further research.
The theory of reasoned action was will be later discussed in
relation to the revised to the theory of planned behavior (hence
forth referred to as TPB). This study didn’t focus on TPB, as the
revised theory has additional predictors. The researcher wanted to
keep the study to a manageable level given the time and logistic
constraints. It would be interesting to investigate if the revised
theory can explain tax compliance behavior better compared to the
TRA. This would be a comprehensive study and since the data for
the second part of that study is already available in this report, it
would be simpler to add to the debate a comparison between the
two theories.
The findings from this study are interconnected with each other but
give different views on attitudes and subjective norms. A more
comprehensive study about attitudes and subjective norms in
relation to tax compliance in Uganda would be appropriate in this
instance and gain insight on what drives attitudes and subjective
norms. The core essence of the two predictors would be the
starting point to renew/ revise the tax system for better
55
enforcement. This research would facilitate tax administration in
Uganda in a large way.
While carrying out the study, the researcher got into contact with
colleagues who were investigating an interesting problem that
could be a challenge especially in developing countries like
Uganda. This is the “free rider problem”. This is a problem in
Africa on issues such as resources and issues that have to do with
an individual being a recipient. However this particular “tax free
rider problem” has to do with individuals requesting the authorities
to levy taxes on them so that they eradicate the free riders from the
society. It would be fascinating to find out if this kind of problem
can arise in Ugandan tax compliance issues.
A further additional study that could be intriguing would be to
compare the effect of attitudes and subjective norms on tax
compliance between developed and developing countries. The
developed countries have vast literature on tax compliance in
existence as compared to matters/issues that arise from developing
countries. A boost to the research gap especially in Africa can be
filled by such a variety of studies.
6.4 limitations to the studyThe theory of reasoned action since its postulation in 1975 has
been revised to include other predictors. In the first instance,
perceived behavioral control was included to predict intention but
this was not included in this study. However the revised theory is
referred to as the “theory of planned behavior. In this research the
old theory was to explain tax compliance behavior. The application
of the theory of planned behavior to explain tax compliance is
suggested for future research.
As no research is perfect some limitations may arise; the theory at
large has been used in association with consumer behavior and
56
thus this new application to tax compliance is unique so it raises
questions of generalizing the findings. Out of the 426
questionnaires the researcher was supposed to collect, 400 were
collected, and 394 were good for usage in analysis. However this
still cant be a reason not to generalize the findings to Uganda, but
this was a capital city population and therefore the findings cant be
generalized to Uganda as a whole and therefore on a larger scale
not even to developing countries.
Ajzen revised methodological considerations for this kind of study
recommended a pilot study before collecting actual data. Due to
time constraints it was not possible to do a pilot study to establish
the drivers of attitudes and therefore a former study questionnaire
was used and adopted for the study. A further constraint in this
was it was used in Canada and therefore may have not been the
best in a Ugandan case and may have affected the quality of data
collected, though given the reliability tests we were able to get
usable data.
Issues of confidentiality arose with some respondents as tax
payment is a sensitive issue in Africa. Thus cooperation from
respondents was with difficulty as SBEs may did not wish to
disclose their tax information or compliance rate or ability for that
matter. The results could have been therefore biased to some
extent.
57
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Table 3
Descriptive statistics for theory of reasoned action variables
Mean Standard Variable deviation Attitudes 3.98 0.9241.Recognition of my good ethics by the community as a consequence of my Complying with the tax laws is:
2.30 1.844
2.Fulfillment of my personal, moral, and ethical obligations as a consequence of my Complying with the tax laws is:
2.20 1.660
3.Fulfillment of my duty as a citizen as a consequence of my Complying with the tax laws is:
1.95 1.547
4.Feeling guilty as a consequence of Not Complying with the tax laws is:
5.32 1.909
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5.The ability to brag to others of non-compliance consequent to Not Complying with tax laws is:
5.32 2.258
6.Not complying with the tax laws consequent to having knowledge of the income tax system is:
4.77 2.211
7.Feeling of having beaten the “system” as a consequence of Not Complying with tax laws is:
5.22 2.093
8.Having more cash available as a consequence of my Not Complying with the is:
5.12 2.084
9.Paying penalties and fines to URA as a consequence of my Not Complying with the tax laws is:
5.57 1.919
10.Providing money to the government for necessary services as a consequence of my Complying with tax laws is:
Intention:
1.98 1.657
1.Complying with the tax laws will result into the recognition of my good ethics by the community:
5.81 1.713
2.Complying with the tax laws will result in the fulfillment of my duty as a citizen:
6.22 1.332
3.Not Complying with the tax laws will enable me to brag about such noncompliance to others:
6.49 .901
4.My Complying with the tax laws is consequent to the presence of accounting records of the business (e.g. computer records or receipts):
3.55 1.752
5.Complying with the tax laws will result in providing money to the government for necessary services:
6.05 1.606
6.Not Complying with the tax laws will result in the payment of penalties and fines to URA:
4.81 2.235
7.Complying with the tax laws will result in the fulfillment of my personal, moral, and ethical obligations:
5.95 1.417
8.My Not Complying with the tax laws is consequent to my knowledge of the income tax system:
5.50 1.378
9.I intend to correctly report my income and deductions on my current year's tax return even if an opportunity to underreport income or not pay on time and in the in the right place arises: Subjective and descriptive norms:
3.85 2.379
1.If I complied with the tax laws, my family (other than my significant other/spouse) would:
4.82 2.016
2.If I complied with the tax laws, my friends would: 4.44 1.9183.If I complied with the tax laws, my significant other would:
4.50 1.889
4.If I complied with the tax laws, my Tax-return Preparer would:
5.02 1.361
5.If I complied with the tax laws, my Business Contacts/Peers would:
5.01 1.745
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6.My family (other than my significant other) comply with the tax laws
2.36 1.718
7.My friends comply with the tax laws 2.84 1.5898.My significant other (spouse) complies with the tax laws
3.01 1.938
9.My tax-preparer complies with the tax laws 3.03 1.46410.My business contacts/ Peers comply with the tax laws
2.44 1.492
Tax compliance behavior:1.Sometimes we attempt to avoid taxes
2.62 1.479
2.URA has threatened us about outstanding taxes to clear
2.09 1.304
3.We have outstanding taxes with URA 2.07 1.1994.URA made us pay a penalty when we delayed to pay tax
1.74 1.103
5.We have under declared income for tax 3.01 1.4096.We delay paying taxes 2.99 1.3527.The money retained through not paying taxes fully helps in business expansion
3.75 1.619
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Appendix II:
Q-Q plots and histograms showing normal distribution
68
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Appendix III:
Questionnaire
Interviewer’s NAME:
......................................
......................DATE:
................................
..................
BACKGROUND INFORMATION
1. Age Age --------------------2. Status Marital status
1 ( ) single (not yet married)2 ( ) married3 ( ) living together4 ( ) divorced or separated 5 ( ) widower/widow
3. Gender Gender 1 ( ) Female 2 ( ) Male
Please tick those that apply to you.4. Educ What is your highest level of education?1 ( ) Did not attend School2 ( ) Primary Level 3 ( ) O’ Level4 ( ) A’ Level5 ( ) Vocational Certificate6 ( ) Diploma 7 ( ) Bachelor’s degree8 ( ) Master’s degree 9 ( ) Others, _________________
70
Data Entry ID nr:
5. Inc What is your gross turnover income? a) Under 500,000 to 5,000,000 UGXb) 5,000,001 to 25,000,000 UGXc) 25,000,001 to 50,000,000 UGX (Please circle one)
6. Taxr For how many years have you filed tax returns? ________________
7. Ptaxr Who prepares your tax returns? a) Myself/Ourselvesb) Tax Preparer? (Circle)
ATTITUDE
Please evaluate the following possible consequences of
complying or not complying with the presumptive tax laws.
1
Extremely good
2 3 4 5 6
7
Extre
mely
bad
att1 Recognition of my good ethics by
the community as a consequence of
my Complying with the tax laws is:
att2 Fulfilment of my personal, moral,
and ethical obligations as a
consequence of my Complying with
the tax laws is:
att3 Saving on the effort required to
prepare my tax return correctly by
Not Complying with the tax laws
is:
att4 Fulfilment of my duty as a citizen as
a consequence of my Complying
with the tax laws is:
att5 Feeling guilty as a consequence of
71
Not Complying with the tax laws
is:
att6 The ability to brag to others of non-
compliance consequent to Not
Complying with tax laws is:
att7 Not complying with the tax laws
consequent to having knowledge of
the income tax system is:
att8 Feeling of having beaten the
“system” as a consequence of Not
Complying with tax laws is:
att9 Having more cash available as a
consequence of my Not Complying
with the is:
att1
0
Paying penalties and fines to URA
as a consequence of my Not
Complying with the tax laws is:
att1
1
Making my friends feel awkward as
a consequence of their discovery of
my Noncompliance with the tax
law is:
att1
2
Providing money to the government
for necessary services as a
consequence of my Complying with
tax laws is:
att1
3
Avoiding an audit by Revenue
Canada as a consequence of my
Complying with tax laws is:
INTENTION
72
Please indicate below your belief of how likely or unlikely
each one of the following outcomes is of occurring
consequent to your complying or not complying with tax
laws.
1Extremely unlikely
2 3 4 5 6 7
extre
mely
likely
int
1
Complying with the tax laws will
result into the recognition of my
good ethics by the community:
int
2
Complying with the tax laws will
result in the fulfilment of my duty as
a citizen:
int
3
Not Complying with the tax laws
will enable me to brag about such
noncompliance to others:
int
4
My Complying with the tax laws is
consequent to the presence of
accounting records of the business
(e.g. computer records or receipts):
int
5
Not Complying with the tax laws
will result in my feeling guilty:
int
6
Not Complying with the tax laws
will result in making my peers feel
awkward when they discover that
fact:
int
7
Complying with the tax laws will
result in providing money to the
government for necessary services:
int
8
Not Complying with the tax laws
will result in the payment of
73
penalties and fines to URA:
int
9
Complying with the tax laws will
result in the fulfilment of my
personal, moral, and ethical
obligations:
Int
10
Complying with the tax laws will
result in the payment of a large
percentage of extra earnings for
taxes:
Int
11
My Not Complying with the tax
laws is consequent to my knowledge
of the income tax system:
int
12
Not Complying with the tax laws
will result in more cash available for
use by me:
INTENT
Please respond to the following question on a seven-point
scale with end-points labelled unlikely and likely provided
after it:
1
Strongly disagree
2 3 4 5 6 7
Stro
ngly
agre
e
intt
1
I intend to correctly report my
income and deductions on my
current year's tax return even if an
opportunity to underreport income
or not pay on time and in the in the
right place arises:
74
Subjective norms
Please indicate below your belief of whether the following
groups of people related to you would approve or disapprove
of your complying with the tax laws:
1Disapprove
2 3 4 5 6 7
app
rov
e
Sub
1
If I complied with the tax laws, my
family (other than my significant
other/spouse) would:
Sub
2
If I complied with the tax laws, my
friends would:
Sub
3
If I complied with the tax laws, my
significant other would:
Sub
4
If I complied with the tax laws, my
Tax-return Preparer would:
Sub
5
If I complied with the tax laws, my
Business Contacts/Peers would:
DESCRIPTIVE NORMS
Please indicate below if the following groups of people
related to you comply with their own tax obligations.
1Completely true
2 3 4 5 6 7
com
plet
ely
false
75
des
1
My family (other than my significant
other) comply with the tax laws
des
2
My friends comply with the tax laws
des
3
My significant other (spouse)
complies with the tax laws
des
4
My tax-preparer complies with the
tax laws
des
5
My business contacts/ Peers comply
with the tax laws
MOTIVATION
Please indicate below the extent to which you care about the
following groups of people, related to you, approving or
disapproving of your complying with the tax laws:
1Not at all
2 3 4 5 6 7
very
muc
h
mot
v1
How much do you care whether
your family (other than your
significant other) approve or
Disapprove of your correct
reporting of your income and paying
on time and in the right place?
mot
v2
How much do you care whether
your friends approve or disapprove
of your correct reporting of your
income and paying on time and in
the right place?
76
mot
v3
How much do you care whether
your significant other approves or
disapproves of your correct
reporting of your income and paying
on time and in the right place?
mot
v4
How much do you care whether
your Tax return Preparer approves
or disapproves of your correct
reporting of your income and paying
on time and in the right place?
mot
v5
How much do you care whether
your Business Contacts/Peers
approve or disapprove of your
correct reporting of your income
and paying on time and in the right
place?
77