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THE MEASURING OF THE DETERMINANTS AFFECTING ENTERPRISE
TAXPAYERS’ COMPLIANCE BEHAVIOR: A CASE STUDY OF
CAN THO CITY, VIETNAM
Manager of the faculty of Accounting - Finance and Bank,
Tay Do University
Manager of the training center for output standards and human resource development,
Tay Do University
Vice Rector ,Tay Do University
ABSTRACT
This paper investigates empirically the factors underlying enterprise taxpayers’ compliance behavior in Can Tho city to uncover the causes of noncompliance. In order to gain in-depth understanding of the phenomenon, the study expands the basic tax compliance model to incorporate perceived tax service quality, public governance quality, ethnic diversity, as well as moderating effects of personal financial condition. This paper conducted during the period from December 2014 to July 2015.
The regression analysis results showed that there were three factors, which included of factors following the tax administrative procedures, human resource management and Information technology system that are components of the enterprise taxpayers’ compliance behavior with significance level 5 %. In addition, the research results processed from SPSS 20.0 software.
The research results showed that there were 190 enterprises who to be interviewed (but 178
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Volume 2, Issue 5, October 2015 enterprises processed) and answered nearly 15 questions. The researchers had analyzed KMO test. Enterprise responses measured through an adapted questionnaire on a 5-point Likert scale. Hard copy and interview account managers by questionnaire distributed among enterprises of Can Tho city. At the same time, the result was also a scientific evidence and important for researchers, and policy makers who apply them for improving the enterprise taxpayers’ compliance behavior in the future.
The researcher had obtained the main objectives of this study were to:
1. The first objective, the researchers had to conduct a survey to find factors that are components of the enterprise taxpayers’ compliance behavior.
2. The second objective, the researchers had to identify and test some factors that are components in enterprise taxpayers’ compliance behavior.
Keywords: Enterprise, taxpayers, behavior, Can Tho city and tax management
Vietnam's economic growth will remain strong in the next two decades, supported by an expanding private sector, which will contribute to greater competition and more efficient resource allocation. A favourable demographic profile and generally improving relations with major trading partners also support the positive long-term outlook. The government will undertake a series of wide-ranging economic reforms, but the pace of institutional change will be slow. A sustained increase in not only foreign direct investment enterprises but also other enterprises will contribute to the upgrading of technology and greater competitiveness. Besides, tax is a contribution exacted by the state. It is a non penal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria.
The classical economic were in view that the only objective of taxation was to raise government revenue. But with the changes in circumstances and ideologies, the aim of taxes has also been changed. These days apart from the object of the raising the public revenue, taxes is levied to affect consumption, production and distribution with a view to ensuring the social welfare through the economic development of a country. The above issue is closely related to the topic
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“ The measuring of the determinants affecting enterprise taxpayers’ compliance behavior: A case study of Can Tho city, Vietnam
” as a paper for researching in the developing of the tax management job in the future.
Theoretically, tax system structure, noncompliance opportunity, attitude and perception have direct influence on tax compliance behavior while demographic factors have indirect influence
(Fischer et al., 1992). Tax system structure is a major determinant of tax compliance behavior
(Jackson & Millron, 1986; Fischer et al., 1992; Fischer, 1993; Richardson & Sawyer, 2001). The factors that determine the effectiveness of the tax system structure of any country include probability of detection, penalty, tax rate and complexity of tax system. Studies have provided evidence linking these factors to compliance behavior (Chan et al., 2000; Fischer et al., 1992;
Fischer, 1993; Jackson & Millron, 1986). Empirically, Friedland, Maital and Reuentberg (1978) reported that tax audits have a strong effect on tax compliance behaviour. Similarly, Witte and
Woodbury (1985) also found that there is a significant positive relationship between tax audit and rate of tax compliance. So did the findings in the studies of Dubin and Wilde (1988), and
Slemrod, Blumenthal and Christian (2001).
The tax authority penalizes the taxpayers who failed to comply with tax rules. Chau and
Leung (2009) claimed that tax penalty is an important factor influencing tax compliance behavior and the authors suggested that the fear of penalties would prohibit the noncompliance tendency. Witte and Woodbury (1985) established a significant relationship between the severity of criminal sanctions and tax compliance. Similar result was reported in Feld and Frey (2006).
Other factors of the tax system structure, which influences tax compliance behavior, include tax rate structure and complexity of the tax system (Fischer et al., 1992).
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This study used of quantitative research methods to survey the factors that affecting the enterprise taxpayers’ compliance behavior in Can Tho city, Vietnam. The results obtained from quantitative research processed by SPSS statistical software version 20.0.
Quantitative research methods describe and measure the level of occurrences based on numbers and calculations. Quantitative research is the collection of numerical data and exhibiting the view of relationship between theory and research as deductive, a predilection for natural science approach, and as having an objectivist conception of social reality. Therefore, this specific form of research uses the quantitative data to analysis.
After preliminary investigations, formal research is done by using quantitative methods questionnaire survey of 190 enterprises related and answered nearly 15 questions. The reason tested measurement models, model and test research hypotheses.
Data collected were tested by the reliability index (excluding variables with correlation coefficients lower < 0.30 and variable coefficient Cronbach's alpha < 0.60), factor analysis explored (remove the variable low load factor < 0.50). The hypothesis was tested through multiple regression analysis with linear Enter method.
Present research relies on self-reported data, but socially desirable responses have been found to be a major challenge when dealing with self-reported data (Thompson and Phua, 2005). In order to get more reliable research data, a short form of the Marlowe-Crowne social desirability scale
(developed and validated by Rudmin, 1999) was used in the questionnaire as well.
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Research model for factors affecting the enterprise taxpayers’ compliance behavior in Can
Tho city
Human resource management (HRM)
Information technology system (ITS)
H
1
H
2
THE
ENTERPRISE
TAXPAYERS’
COMPLIANCE
BEHAVIOR
Tax administrative procedures (TAP)
H
3
Figure 1: Research model for factors affecting the enterprise taxpayers’ compliance behavior in Can Tho city
Hypothesis:
H
1
: There is a positive relationship between Human resource management
(HRM) and the enterprise taxpayers’ compliance behavior in Can Tho city.
H
2
: There is a positive relationship between Information technology system
(ITS) and the enterprise taxpayers’ compliance behavior in Can Tho city.
H
3
: There is a positive relationship between Tax administrative procedures
(TAP) and the enterprise taxpayers’ compliance behavior in Can Tho city.
Descriptive Statistics the factors affecting the enterprise taxpayers’ compliance behavior in
Can Tho city
Table 1: Descriptive Statistics for factors affecting the enterprise taxpayers’ compliance behavior
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Items N Min Max Mean Std.
Deviation
TAP1: The procedures and processes is addressing the tax records are public, transparent at tax department of Can Tho city
178 1.00 5.00 3.1573 .94956
TAP2: The administrative procedures are in the field of simple and straightforward tax at tax department of Can Tho city
178 1.00 5.00 3.2079 .97224
TAP3: The "one stop model" in resolving the administrative procedures applied in the tax
178 1.00 5.00 3.0787 .98261 offices operate effectively, facilitating the enterprises at tax department of Can Tho city
TAP4: The tax management process is according to ISO 9001: 2008 by the tax office
178 1.00 5.00 3.2753 .93129 for processing dossiers faster than expected now at tax department of Can Tho city
ITS1: The website of the tax offices is regularly updated and provides full documentation, tax guidelines at tax department of Can Tho city
178 1.00 5.00 3.4270 .91303
ITS2: The tax offices applied online tax return filing has helped enterprises convenient and
178 1.00 5.00 3.5225 .95198 save time, costs more than the previous tax forms at tax department of Can Tho city
ITS3: The Data transmission is responsive to online tax declarations of enterprises at tax department of Can Tho city
178 1.00 5.00 3.4045 .97098
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ITS4: The tax offices have performed application of information technology in supporting enterprise implement tax obligations at tax department of Can Tho city
178 1.00 5.00 3.3708 .91913
HRM1: The tax officials have tactful attitude, civilized and courteous when communicating, 178 2.00 5.00 4.0000 .96258 behavior at tax department of Can Tho city
HRM2: The tax officials understand about master policy or tax professional at tax 178 2.00 5.00 3.8820 .99298 department of Can Tho city
HRM3: The tax officers are proficient processes and task-solving skills at tax department of Can Tho city
HRM4: The tax officers are proficient in foreign languages at tax department of Can
Tho city
178
178
1.00 5.00 3.4326
2.00 5.00 3.7022
1.08323
1.29147
TCB1: Enterprise is committed to pay tax on legal provisions at tax department of Can Tho 178 2.00 4.00 3.3371 .58113 city
TCB2: Enterprise said that the results of today's tax compliance is appropriate now at tax department of Can Tho city
178 1.00 5.00 2.3539 .61388
TCB3: Enterprises will propagate to all employees on duty to improve tax compliance 178 2.00 5.00 4.2697 .66832 results at tax department of Can Tho city
(Source: The researcher’s collecting data and SPSS)
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Table 1 showed that there were 178 enterprises processed and answered 15 questions. Besides, max value is 5, min value is 1, mean value is around 3.0 and Std. Deviation is around 1.0. This showed that the Data is very good for the next analysis.
Test KMO and Bartlett shows two tests that indicate the suitability of your data for structure detection. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy is a statistic that indicates the proportion of variance in your variables that might be caused by underlying factors.
Reliability test: offer mainly Cronbach’s alpha methods to show how well the measurements in a set of variables are well correlate with each other. According to Canava et al. (2001), he stated,
“Cronbach’s alpha is computed in terms of average inter-correlations among items, which determine the concepts.” Although Bryman and Cramer (1990) suggested that, it is just fine when Cronbach’s alpha is 0.8 or above 0.8, while Nunnally (1978) stated that it is still acceptable with the value of 0.6, especially for initial investigation like in this research. Therefore, in this research, the value is confirmed when it is greater than 0.7.
Table 2: KMO and Bartlett's Test for factors affecting the enterprise taxpayers’ compliance behavior
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .787
Approx. Chi-Square 1907.865
Bartlett's Test of
Sphericity df 66
Sig. .000
Total Variance Explained
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Com.
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Volume 2, Issue 5, October 2015
Initial Eigenvalues Extraction Sums of Squared
Loadings
Rotation
Sums of
Squared
Loadings a
Total Total % of
Variance
Cumulative
%
5
6
7
1 4.814 40.113
2 3.228 26.904
3 1.492 12.434
4 .682 5.680
.490
.365
.270
4.082
3.042
2.249
8
9
.211 1.757
.182 1.517
10 .120 .998
11 .105 .876
12 .042 .348
40.113 4.814 40.113
67.017 3.228 26.904
79.451 1.492 12.434
85.131
89.213
92.256
94.504
96.261
97.778
98.776
99.652
100.000
Total % of
Variance
Cumulative
%
40.113
67.017
79.451
3.227
4.009
3.993
Extraction Method: Principal Component Analysis. a. When components are correlated, sums of squared loadings cannot be added to obtain a total variance.
(Source: The researcher’s collecting data and SPSS)
Table 2 showed that Kaiser-Meyer-Olkin Measure of Sampling Adequacy was statistically significant and high data reliability (KMO = 0 .787 > 0.6). This result was very good for data analysis. Table 2 showed that Cumulative percent was statistically significant and high data reliability was 79.451 % ( > 60 %). This is factors for independent variables.
In addition, KMO and Bartlett's Test for the enterprise taxpayers’ compliance behavior was statistically significant and high data reliability (KMO = 0.697 > 0.6).
Cumulative percent was
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Volume 2, Issue 5, October 2015 statistically significant and high data reliability was 89.067 % (> 60 %). This is factors for dependent variable (Y).
The research results showed that all t value > 2 was statistically significant and high data reliability. Besides, the regression coefficients were positive. This showed that the effects of independent variables in the same direction with the enterprise taxpayers’ compliance behavior with significance level 5 %. Verifying the conformity of the model showed the multicollinearity did not violate (VIF < 10).
Table 3: Structure Matrix for factors affecting the enterprise taxpayers’ compliance behavior
Code
1
Component
2 3
HRM1
HRM4
.942
.889
HRM2
HRM3
ITS3
ITS2
ITS1
ITS4
TAP1
TAP2
.889
.862
.939
.911
.804
.785
.986
.952
TAP3 .933
TAP4 .517
(Source: The researcher’s collecting data and SPSS)
Table 3 showed that Structure Matrix for the factors affecting the enterprise taxpayers’ compliance behavior had three Components. Component 1 was the Human resource management
(HRM: X1), Component 2 was the Information technology system (ITS: X2) and Component 3 was the Tax administrative procedures (TAP: X3).
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Y: the enterprise taxpayers’ compliance behavior
Regression analysis for factors affecting the enterprise taxpayers’ compliance behavior
Table 4: the results of Regression analysis for factors affecting the enterprise taxpayers’ compliance behavior
Model
1
R
.731
R Square
.534
Adjusted R
Square
.526
ANOVA
Std. Error of the Estimate
.68860501
Durbin-Watson
1.774
1
Model
Regression
Residual
Total
Sum of Squares
94.728
82.507
177.235 df
3
174
177
Mean Square
31.576
.474
F
66.591
Sig.
.000
Coefficients
Variables
(Constant)
X1
Unstandardized
Coefficients
B
-.008
.441
.430
Std.
Error
.052
.052
.060
Standardized
Coefficients
(Beta)
.443 t
-.158
8.551
Sig.
.874
.000
Collinearity
Statistics
Tolerance
.998
VIF
1.002
X2 .431 7.171 .000 .739 1.353
X3 .233 .060 .234 3.893 .000 .739 1.352
(Source: The researcher’s collecting data and SPSS)
Table 4 showed the coefficient of adjustment R
2
= 0.526 (verification F = 66.591, significance <
0.05); which means 52.6 % of the variable Y (the enterprise taxpayers’ compliance behavior) shift is explained by three independent variables (Xi). The coefficient of Durbin - Watson (d) =
1.774. This proved the model had no autocorrelation. In addition, the multiple regressions model that satisfied the evaluating conditions and tested the suitability for the drawing of the research
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Volume 2, Issue 5, October 2015 results. F value is from variance of analysis ( ANOVA) was very significant. This accreditation examines the relationship among the dependent variable and all the independent variables.
This article aims to study the factors that affect the enterprise taxpayers’ compliance behavior and the results showed that the effects of independent variables in the same direction with the enterprise taxpayers’ compliance behavior. We had three findings following:
First of all, human resource management: It is the process of recruitment, selection of employee, providing proper orientation and induction, providing proper training and the developing skills, assessment of employee (performance of appraisal). In addition, it provides proper compensation and benefits, motivating, maintaining proper relations with labor and with trade unions, maintaining employees’ safety, welfare and health by complying with labor laws of concern state or country. This showed that we should improve the component 1 (X1) for the enterprise taxpayers’ compliance behavior with significance level of five percent.
Secondly, information technology system (ITS): It often is in the context of a business or other enterprise. It is the application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data, often in the context of a business or other enterprise. The term is commonly used as a synonym for computers and computer networks, but it also encompasses other information distribution technologies such as television and telephones.
Several industries are associated with information technology, including computer hardware, software, electronics, semiconductors, internet, telecom equipment, e-commerce and computer services. We should improve the component 2 (X2) for the enterprise taxpayers’ compliance behavior with significance level of five percent.
Finally, tax administrative procedures (TAP): they are a set or system of rules that govern the procedures for managing an organization. These procedures are meant to establish efficiency, consistency, responsibility, and accountability. We should improve the component 3 (X3) for the enterprise taxpayers’ compliance behavior with significance level five percent.
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The contributions to the literature, the study provided evidence indicating that taxpayers’ perception of quality of tax service and public governance quality as significant determinants of tax compliance behavior. In addition, the study reaffirmed the finding of the previous studies concerning the impact of culture on compliance behavior, however, this time in a more ethnically fragmented and polarized society in Can Tho city than was previously tested.
In addition, the findings from the study have enriched the tax compliance literature, particularly concerning factors influencing tax compliance behavior in developing countries. And the findings also suggest the need to direct public policy towards improving the low perception of taxpayers about the quality of public governance in Can Tho city to enhance tax compliance behavior.
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