Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland

Abdifatah Ahmed Hurre

doi:doi:10.11648/j.ijefm.20221004.14

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Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland

Abdifatah Ahmed Hurre

Published in International Journal of Economics, Finance and Management Sciences (Volume 10, Issue 4)

Received: 30 May 2022 Accepted: 11 July 2022 Published: 22 July 2022

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Abstract

For Somaliland government, to increase the collection of different tax revenue from the various taxable citizens, it is very crucial to explore why people comply or not comply with tax rules and regulations of the country and consequently, achieve a level where people voluntarily comply with tax laws and file tax return on time without underestimating the income statement. Hence, the goal of this study was to look into the factors that influence tax compliance behavior in Burao, Somaliland, using small and medium-sized enterprises (SMEs) as a case study. The study focused on factors such as tax audit, tax rate, tax payers' perception of government spending, penalty, fairness and equity of the tax system, referent group influence, tax knowledge and awareness, and tax authority efficiency. The study employed a quantitative research approach and a descriptive study in design. The study's target population was the SMEs in Burao, which numbered 1069, according to the Ministry of Finance Development and the Ministry of Trade and Tourism, and the researcher selected a sample of 171 SMEs using stratified random sampling. Self-administered questionnaire was used as a data collection instrument for the study. In addition to that, the author utilized both descriptive and econometric analysis; multiple regression was used as an econometric technique to determine the effect of a predictor on the predicted. The findings from the regression indicated that tax audit, tax knowledge and awareness, perception of government spending, the influence of referent groups, and the efficiency of tax authorities are the main determinants that have a statistically significant positive impact on the tax compliance behavior of the SME taxpayers in Burao City. On the other hand, it has been identified that tax rates, the fairness and equity in the tax system, and penalties/fines are found to have a statistically insignificant positive influence on the tax compliance behavior of SME taxpayers. Finally, to boost the tax compliance of the Burao SME taxpayers, the study put forward some recommendations according to the study’s findings, including enhancing the auditing/investigation capabilities of tax authorities, boosting the tax knowledge and awareness of the SME taxpayers, improving the perception of taxpayers towards government spending, and strengthening the effectiveness and efficiency of tax authorities in terms of their service delivery, enforcing laws, creating awareness, and offering consulting services to clients.

Published in	International Journal of Economics, Finance and Management Sciences (Volume 10, Issue 4)
DOI	10.11648/j.ijefm.20221004.14
Page(s)	185-197
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Tax Compliance, Determinants of Tax Compliance, SMEs, Multiple Regression

References

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Abdifatah Ahmed Hurre. (2022). Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. International Journal of Economics, Finance and Management Sciences, 10(4), 185-197. https://doi.org/10.11648/j.ijefm.20221004.14

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ACS Style

Abdifatah Ahmed Hurre. Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. Int. J. Econ. Finance Manag. Sci. 2022, 10(4), 185-197. doi: 10.11648/j.ijefm.20221004.14

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AMA Style

Abdifatah Ahmed Hurre. Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. Int J Econ Finance Manag Sci. 2022;10(4):185-197. doi: 10.11648/j.ijefm.20221004.14

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@article{10.11648/j.ijefm.20221004.14,
  author = {Abdifatah Ahmed Hurre},
  title = {Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {10},
  number = {4},
  pages = {185-197},
  doi = {10.11648/j.ijefm.20221004.14},
  url = {https://doi.org/10.11648/j.ijefm.20221004.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20221004.14},
  abstract = {For Somaliland government, to increase the collection of different tax revenue from the various taxable citizens, it is very crucial to explore why people comply or not comply with tax rules and regulations of the country and consequently, achieve a level where people voluntarily comply with tax laws and file tax return on time without underestimating the income statement. Hence, the goal of this study was to look into the factors that influence tax compliance behavior in Burao, Somaliland, using small and medium-sized enterprises (SMEs) as a case study. The study focused on factors such as tax audit, tax rate, tax payers' perception of government spending, penalty, fairness and equity of the tax system, referent group influence, tax knowledge and awareness, and tax authority efficiency. The study employed a quantitative research approach and a descriptive study in design. The study's target population was the SMEs in Burao, which numbered 1069, according to the Ministry of Finance Development and the Ministry of Trade and Tourism, and the researcher selected a sample of 171 SMEs using stratified random sampling. Self-administered questionnaire was used as a data collection instrument for the study. In addition to that, the author utilized both descriptive and econometric analysis; multiple regression was used as an econometric technique to determine the effect of a predictor on the predicted. The findings from the regression indicated that tax audit, tax knowledge and awareness, perception of government spending, the influence of referent groups, and the efficiency of tax authorities are the main determinants that have a statistically significant positive impact on the tax compliance behavior of the SME taxpayers in Burao City. On the other hand, it has been identified that tax rates, the fairness and equity in the tax system, and penalties/fines are found to have a statistically insignificant positive influence on the tax compliance behavior of SME taxpayers. Finally, to boost the tax compliance of the Burao SME taxpayers, the study put forward some recommendations according to the study’s findings, including enhancing the auditing/investigation capabilities of tax authorities, boosting the tax knowledge and awareness of the SME taxpayers, improving the perception of taxpayers towards government spending, and strengthening the effectiveness and efficiency of tax authorities in terms of their service delivery, enforcing laws, creating awareness, and offering consulting services to clients.},
 year = {2022}
}

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TY  - JOUR
T1  - Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland
AU  - Abdifatah Ahmed Hurre
Y1  - 2022/07/22
PY  - 2022
N1  - https://doi.org/10.11648/j.ijefm.20221004.14
DO  - 10.11648/j.ijefm.20221004.14
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 185
EP  - 197
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20221004.14
AB  - For Somaliland government, to increase the collection of different tax revenue from the various taxable citizens, it is very crucial to explore why people comply or not comply with tax rules and regulations of the country and consequently, achieve a level where people voluntarily comply with tax laws and file tax return on time without underestimating the income statement. Hence, the goal of this study was to look into the factors that influence tax compliance behavior in Burao, Somaliland, using small and medium-sized enterprises (SMEs) as a case study. The study focused on factors such as tax audit, tax rate, tax payers' perception of government spending, penalty, fairness and equity of the tax system, referent group influence, tax knowledge and awareness, and tax authority efficiency. The study employed a quantitative research approach and a descriptive study in design. The study's target population was the SMEs in Burao, which numbered 1069, according to the Ministry of Finance Development and the Ministry of Trade and Tourism, and the researcher selected a sample of 171 SMEs using stratified random sampling. Self-administered questionnaire was used as a data collection instrument for the study. In addition to that, the author utilized both descriptive and econometric analysis; multiple regression was used as an econometric technique to determine the effect of a predictor on the predicted. The findings from the regression indicated that tax audit, tax knowledge and awareness, perception of government spending, the influence of referent groups, and the efficiency of tax authorities are the main determinants that have a statistically significant positive impact on the tax compliance behavior of the SME taxpayers in Burao City. On the other hand, it has been identified that tax rates, the fairness and equity in the tax system, and penalties/fines are found to have a statistically insignificant positive influence on the tax compliance behavior of SME taxpayers. Finally, to boost the tax compliance of the Burao SME taxpayers, the study put forward some recommendations according to the study’s findings, including enhancing the auditing/investigation capabilities of tax authorities, boosting the tax knowledge and awareness of the SME taxpayers, improving the perception of taxpayers towards government spending, and strengthening the effectiveness and efficiency of tax authorities in terms of their service delivery, enforcing laws, creating awareness, and offering consulting services to clients.
VL  - 10
IS  - 4
ER  -

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Abdifatah Ahmed Hurre

Department of Research and Publication, Alpha University Burao, Burao, Somaliland

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Abdifatah Ahmed Hurre. (2022). Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. International Journal of Economics, Finance and Management Sciences, 10(4), 185-197. https://doi.org/10.11648/j.ijefm.20221004.14

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ACS Style

Abdifatah Ahmed Hurre. Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. Int. J. Econ. Finance Manag. Sci. 2022, 10(4), 185-197. doi: 10.11648/j.ijefm.20221004.14

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AMA Style

Abdifatah Ahmed Hurre. Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland. Int J Econ Finance Manag Sci. 2022;10(4):185-197. doi: 10.11648/j.ijefm.20221004.14

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@article{10.11648/j.ijefm.20221004.14,
  author = {Abdifatah Ahmed Hurre},
  title = {Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland},
  journal = {International Journal of Economics, Finance and Management Sciences},
  volume = {10},
  number = {4},
  pages = {185-197},
  doi = {10.11648/j.ijefm.20221004.14},
  url = {https://doi.org/10.11648/j.ijefm.20221004.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20221004.14},
  abstract = {For Somaliland government, to increase the collection of different tax revenue from the various taxable citizens, it is very crucial to explore why people comply or not comply with tax rules and regulations of the country and consequently, achieve a level where people voluntarily comply with tax laws and file tax return on time without underestimating the income statement. Hence, the goal of this study was to look into the factors that influence tax compliance behavior in Burao, Somaliland, using small and medium-sized enterprises (SMEs) as a case study. The study focused on factors such as tax audit, tax rate, tax payers' perception of government spending, penalty, fairness and equity of the tax system, referent group influence, tax knowledge and awareness, and tax authority efficiency. The study employed a quantitative research approach and a descriptive study in design. The study's target population was the SMEs in Burao, which numbered 1069, according to the Ministry of Finance Development and the Ministry of Trade and Tourism, and the researcher selected a sample of 171 SMEs using stratified random sampling. Self-administered questionnaire was used as a data collection instrument for the study. In addition to that, the author utilized both descriptive and econometric analysis; multiple regression was used as an econometric technique to determine the effect of a predictor on the predicted. The findings from the regression indicated that tax audit, tax knowledge and awareness, perception of government spending, the influence of referent groups, and the efficiency of tax authorities are the main determinants that have a statistically significant positive impact on the tax compliance behavior of the SME taxpayers in Burao City. On the other hand, it has been identified that tax rates, the fairness and equity in the tax system, and penalties/fines are found to have a statistically insignificant positive influence on the tax compliance behavior of SME taxpayers. Finally, to boost the tax compliance of the Burao SME taxpayers, the study put forward some recommendations according to the study’s findings, including enhancing the auditing/investigation capabilities of tax authorities, boosting the tax knowledge and awareness of the SME taxpayers, improving the perception of taxpayers towards government spending, and strengthening the effectiveness and efficiency of tax authorities in terms of their service delivery, enforcing laws, creating awareness, and offering consulting services to clients.},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Determinants of Tax Compliance Behavior: The Case of Small and Medium Enterprises in Burao City, Somaliland
AU  - Abdifatah Ahmed Hurre
Y1  - 2022/07/22
PY  - 2022
N1  - https://doi.org/10.11648/j.ijefm.20221004.14
DO  - 10.11648/j.ijefm.20221004.14
T2  - International Journal of Economics, Finance and Management Sciences
JF  - International Journal of Economics, Finance and Management Sciences
JO  - International Journal of Economics, Finance and Management Sciences
SP  - 185
EP  - 197
PB  - Science Publishing Group
SN  - 2326-9561
UR  - https://doi.org/10.11648/j.ijefm.20221004.14
AB  - For Somaliland government, to increase the collection of different tax revenue from the various taxable citizens, it is very crucial to explore why people comply or not comply with tax rules and regulations of the country and consequently, achieve a level where people voluntarily comply with tax laws and file tax return on time without underestimating the income statement. Hence, the goal of this study was to look into the factors that influence tax compliance behavior in Burao, Somaliland, using small and medium-sized enterprises (SMEs) as a case study. The study focused on factors such as tax audit, tax rate, tax payers' perception of government spending, penalty, fairness and equity of the tax system, referent group influence, tax knowledge and awareness, and tax authority efficiency. The study employed a quantitative research approach and a descriptive study in design. The study's target population was the SMEs in Burao, which numbered 1069, according to the Ministry of Finance Development and the Ministry of Trade and Tourism, and the researcher selected a sample of 171 SMEs using stratified random sampling. Self-administered questionnaire was used as a data collection instrument for the study. In addition to that, the author utilized both descriptive and econometric analysis; multiple regression was used as an econometric technique to determine the effect of a predictor on the predicted. The findings from the regression indicated that tax audit, tax knowledge and awareness, perception of government spending, the influence of referent groups, and the efficiency of tax authorities are the main determinants that have a statistically significant positive impact on the tax compliance behavior of the SME taxpayers in Burao City. On the other hand, it has been identified that tax rates, the fairness and equity in the tax system, and penalties/fines are found to have a statistically insignificant positive influence on the tax compliance behavior of SME taxpayers. Finally, to boost the tax compliance of the Burao SME taxpayers, the study put forward some recommendations according to the study’s findings, including enhancing the auditing/investigation capabilities of tax authorities, boosting the tax knowledge and awareness of the SME taxpayers, improving the perception of taxpayers towards government spending, and strengthening the effectiveness and efficiency of tax authorities in terms of their service delivery, enforcing laws, creating awareness, and offering consulting services to clients.
VL  - 10
IS  - 4
ER  -

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