Academic journal article Business and Economics Research Journal

Confirmatory Factor Analysis on Tax Compliance Intentions, General Fairness, Procedural Fairness and Social Norms 1

Academic journal article Business and Economics Research Journal

Confirmatory Factor Analysis on Tax Compliance Intentions, General Fairness, Procedural Fairness and Social Norms 1

Article excerpt

1.Introduction

The concept of tax compliance is complex term to define; however its wide-ranging definitions can be handled under two key categories. These categories are administrative compliance and technical compliance. Administrative compliance entails complying with the administrative rules of lodging tax returns and paying tax on time. This compliance can also be called reporting compliance and procedural or regulatory compliance. The technical compliance on the other hand refers to complying with technical requirements of tax laws (Marti, Migvi & Obara, 2010: 113). There is a rapidly growing body of literature analysing the reasons for taxpayer compliance and non-compliance (for extensive reviews, see: Kirchler, 2007). Theoretically, literature has provided evidence suggesting that tax compliance is influenced by socio psychological factors, political factors and economic factors (Nekwe, 2013:116). The early scholars and researchers based their work on the economic perspectives of tax compliance. They determined tax rate, probability detection and penalty rate as factors influencing tax compliance. But later, other theorists and researchers recognised that compliance cannot be explained completely by levels of enforcement. They have identified other factors such as social norms, perceptions of tax fairness, etc. (OECD, 2010; Feld & Frey, 2007; Torgler, 2002).

The use of social norms is one of the most popular concepts in social sciences disciplines including sociology, law, political science, and economics. The importance of social norms comes from the fact that they persuade people to behave in a certain way by telling them which attitudes are accepted as right or wrong (Saborit, 2015: 7). Fehr and Gachter (2000) define social norms as a behavioral regularity that is based on a socially shared belief and argues that these norms constitute the driving force behind the attitudes adopted by individuals due to the informal social sanctions (Nabaweesi, 2006: 12). According to another definition made by Cialdini and Trost (1998: 152), social norms are "rules and standards that are understood by members of a group and that guide and/or constrain social behavior without the force of law". The four categories of social norms identified by Cialdini and Trost are descriptive norms, injunctive norms, subjective norms and personal norms. Descriptive norms are the standards that develop out of observation of others' actual behavior in given situations (Bobek, Roberts & Sweeney, 2007: 4). Injunctive norms, on the other hand, refer to what is required to be done and reveal the moral values of a group. In fact, injunctive and descriptive norms co-occur in that if an individual perceives tax evasion is common (descriptive norms), they will infer that the percentage of people who socially approve of tax evasion to be high (injunctive norms) (Onu & Oats, 2014: 7). Subjective norms reflect an individual's perception of whether his/her specific behavior is to be approved or not by the people important to him/her (Bobek & Hatfield, 2003: 18). In other words, the underlying element for subjective norms is referent others' (e.g. family, co-workers and friends) approval. Since subjective norms relate specifically expectations of referent others, they are a specific type of injunctive norms (Hite, 1996: 76). Finally, personal norms are individuals' moral /ethical standards and beliefs about appropriate behavior, which may arise from the internationalization of subjective, injunctive and descriptive norms (Wenzel, 2004: 551; Çevik, 2012: 269).

Perceived fairness of tax system has been identified by researchers as one of the most important factors that can influence tax compliance behavior (Thomas, 2012: 1). If the tax system is perceived as fair, tax compliance is likely to increase whereas a system perceived as unfair might increase non-compliance (Barbutamışu, 2011: 74). In the context of tax behavior literature, perceived fairness can be expressed in the form of distributive fairness, procedural fairness, and retributive fairness. …

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