By Donald M. Bondwe
In the world of taxation today, it is very important to realize or understand that satisfaction towards service quality provided to taxpayers by any revenue authority remain one of the criteria to influence taxpayers level of tax compliance.
This is in reference to a study made by Richardson (2000). In his study, he found out that if taxpayers are satisfied with the fairness of the tax law, the probability that they may engage in tax evasion is very negligible. This explains that taxpayers will be less involved in tax evasion if they believe the tax system is fair and equitable. This seems to be in line with what Beikaoui (2004) came up with by stating that effectiveness of the tax law has significant positive relationship with the level of tax compliance. This therefore supports the idea that taxpayers are more willing to comply with the tax laws when they are satisfied with the level of its effectiveness.
As an emphasis in matter on what has been said in the foregoing paragraph. Junainah (2002) in her study towards implementation of self-assessment system among taxpayers in Kola-Kinabalu-Malaysia, she found out that a greater percentage of taxpayers were unwilling to participate in the tax compliance survey because of the problems they found in filling tax returns and calculating income tax payable. This means that the respondents were not satisfied with the simplicity of the tax system.
In a different study on taxpayers satisfaction Talubi et al (2008) revealed that most respondents are not satisfied with the services provided by tax administration. Among the services provided are unavailability of servers for online transaction, lack of courtesy from staff members, problems to do with equipment breakdown and long queues she concludes.
Bagchi Bird and Dasgapta (1995) do observe that withholding tax at source has been universally found to increase tax compliance as long as the withholding tax agent is strictly monitored.
However Clotfeiter (1983) indicates that a higher tax rate leads to lower tax compliance. He finds that noncompliance increases significantly with magical tax rates.
Crave and Nouzad (1992) agree in total that tax evasion is positively affected by magical tax return.
The author who for a very long time worked for MRA does agree with the above observation that the higher the tax rates, the more likely are tax payers able to evade tax and indeed this syndrome exists in Malawi Revenue Authority.
According to Durbin and Wide (1988) there is strong evidence that quality audits are a tax compliance tool. This has been echoed by Dubin, Graetz and Wide (1990).
The author seems to agree with this observation on the understanding that in practice observation has it that where tax audits have been objectively conducted tax payers have never remained the same on tax compliance i.e. the levels of tax compliance have always increased with increased audits.
Pommerehie and Weck-Hamnemann (1989) think differently when he says that in most countries tax compliance may not be an issue of social service quality but rather social norms. What he means is that individual attitudes on government fairness with them may determine tax compliance.
The author seems to differ with this in that as far as tax compliance in MRA is concerned to a greater extent, it is influenced by service quality on tax products offered by MRA and very little or none at all on social norms.
Co-well and Gordon (1988) observed that individuals and corporations pay taxes because they value what they get in return for taxes.
The author seems to agree with this statement on the understanding that the more development projects government work on the higher the likelihood of people paying more taxes. They see the benefits of paying taxes.
The author agrees with the above observation with a practical example which happened between 1994 and 2004. The government of the day provided minimal development project, the consequence was a massive reduction on the tax compliance and this was the most difficult period ever experienced in the enforcement of tax.
Author: Donald M. Bondwe | Former Deputy Commissioner-MRA | Now-Tax Attorney and Advisor – Small Globe Consulting | E-mail: smallglobeconsulting | Contact: 0999950756