Fostering a Culture of Voluntary Tax Compliance among the Construction Contractors; Drivers and Barriers at Firm and Policy Level

Abstract

Effective tax money collection is crucial for any modern sphere of economic development. This research explores the unique challenges faced by construction contractors in meeting tax obligations and the factors that drive their compliance behavior. The study investigates the reasons behind noncompliance, including factors such as complex tax codes, financial constraints, inadequate knowledge and understanding of tax requirements, and perceived unfairness in the tax system. Additionally, the research explores factors that can encourage contractors to voluntarily comply with tax obligations, such as the benefits of maintaining a good reputation, avoiding penalties, and accessing government incentives. A literature survey was undertaken to identify drivers and barriers behind voluntary tax compliance. A questionnaire was piloted on five (5) senior construction practitioners those who have more than 25 years working experience to establish the appropriateness of the questions and alleviate the inconsistencies, if any. A structured questionnaire survey was subsequently carried out to test the reality on the ground. Based on the findings, the study suggests 13 key determinants inspiring voluntary tax compliance, 8 drivers that effectively encourage voluntary tax compliance and 19 reasons behind tax evasion in the construction industry. By addressing these drivers and barriers, this research aims to foster a tax system that enhances voluntary compliance at two tiers namely, firm and policy.