Conceptual Overview of Tax Compliance and Tax Perception
Tax compliance or voluntary tax compliance is an important issue frequently encountered in studies conducted especially in the field of tax psychology. Basically, it can be defined as the taxpayers paying their taxes in full and on time without being forced to by the tax administration (Saygin 2013).
At this point, we should be considered that even if one of the motivations that ensures compliance is worrying about a forced sanction, the taxpayers have fulfilled their tax liability completely and on time without any direct sanction by the tax administration.When it comes to tax compliance, studies mention four types of taxpayers. They are called honest or voluntary taxpayers, sincere taxpayers, social taxpayers and tax evaders. An honest taxpayer is defined as a taxpayer who pays tax without being affected by any external stimulus with a very high tax compliance (Tosuner and Demir 2009). Sincere taxpayers are a type of taxpayer who has high personal tax compliance and pay tax regardless of the compliance of other taxpayers or the status of public services but tend to be affected by the attitude and behaviour of the tax administration. A social taxpayer is the type of taxpayer who is affected by the frequency of audits and amnesties, who has the anxiety and embarrassment behind their tax compliance, their tax compliance increases especially in cases where they think that other taxpayers also pay taxes and the taxation is fair, while otherwise it decreases or completely disappears. A tax evader, on the other hand, is the taxpayer with the lowest tax ethics and tax compliance, and this taxpayer, whose basic motivation is not to pay taxes, will try to evade tax regardless of the conditions (Tosuner and Demir 2009). Countries that aim to increase their tax efforts and tax revenues should increase the ratio of honest taxpayers among all taxpayers as much as possible.
In addition to that to implement practices that will increase “Tax Compliance” of social and sincere taxpayers is important as well. In most cases, certain behaviours that will increase the harmony of social and sincere taxpayers will also result in the capture and punishment of tax evaders.There are many factors that affect tax compliance, such as tax ethics, frequency of tax audits, high possible penalties, frequency of amnesty practices, belonging to the country to which tax will be paid, easy understanding of tax regulations and their frequent changes (Ta§kin 2012). It is predicted that tax compliance will increase in times such as war and coup. In fact, it has been indirectly demonstrated that the displacement theory in public expenditures is valid in times of coups, as it is predicted to be in other crisis times, and that the public revenues should increase accordingly and therefore tax compliance increases (Kutbay and Gerede 2019). New reasons other than those listed may also arise for each concrete situation.
Some of the variables that affect tax compliance will also directly affect tax perception; the attitude of the tax administration, the demographic structure of taxpayers, the frequency of tax amnesties is just a few of the variables that affect tax perception positively or negatively. Again, the perception that taxes are fair is one of the factors that positively affect both tax perception and tax compliance (Qetin 2007). The concentration of public expenditures on the issues that the taxpayers attach importance to and the low level of claims such as corruption is among the variables that are expected to positively affect tax perception.
Another factor that affects tax compliance and tax perception together is the tax burden. Tax burden is defined in two different ways; the rate at which taxes cause a decrease in the economic power of the taxpayer is called objective tax burden (Qoban et al. 2004), and the extent to which the taxpayer feels the objective tax burden depends on the psychological and demographic structure of the taxpayer and is named as subjective tax burden (Nadaroglu 1998).
In most cases, the taxpayer’ perception of the tax is initially bearing the economic burden; as the magnitude of the impact of this amount on the economic well-being of the taxpayer increases, the subjective burden of the tax will increase more than its objective burden. In fact, according to Laffer (2004), after a certain rate, the subjective tax burden for taxpayers reaches an unbearable dimension and the tax payment behaviour reaches a size that will reduce the tax revenue of the country.The frequency of tax audits also positively affects tax compliance (Ta§kin 2012). As the risk of getting caught as a result of the audit increases and the penalty to be incurred becomes definite, tax evasion becomes economically harmful for the taxpayer and tax compliance increases accordingly. Behind this behaviour lies the idea that the individual tries to maximize his/her economic interest and will do the best for himself/herself as a result of cost-benefit comparison (Doyle et al. 2009).
Increasing tax inspections also contributes to tax compliance by affecting tax perception positively. Since the taxpayer will not face the risk of withdrawing from the competition by paying tax, he will not develop a non-paying-tax behaviour. As a result of these audits, practices such as the disclosing of those found to have evaded taxes may also affect tax compliance (Tosuner and Demir 2009). For a similar reason, the announcement of tax record holders also encourages tax compliance.
Most of the situations mentioned above that affect tax compliance affect one type of taxpayer more than the others. The general tax compliance of the country will increase faster if a good tax administration takes measures that will affect as much of a taxpayer group as possible by observing this situation and recognizing its own taxpayers.
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