Factors Influencing Tax Payers’ Compliance among Small and Medium Enterprises (SMEs) in Sri Lanka

Abstract

Attached

Tax non-compliance is considered a serious challenge, which slackens income tax administration and tax revenue performance. The main objective of this study is to explore the prominent factors influencing tax compliance among SMEs in Sri Lanka.The concise conclusion of the study revealed that tax compliance of SME owners was influenced significantly by three factors: the propensity of being positive at government expenditure pattern, low tax avoidance/ evasion tendency of referent group and earning comparatively low income. They are found as prominent factors that are more likely to deliver the desired increase in tax compliance. In particular, high amount tax payers are more sensitive towards government policy implementation patterns and the way the government uses their tax money. Also, those who earn more income tend to hide their actual income as they are more concerned with investing to expand their business rather than allocating more on taxes. Nevertheless, results are also consistent with prior studies on this taxation in different contexts.