1. Introduction
Taxes are one of the crucial factors in managing national income, especially in developed countries, and taxes have played a central role in societies since their inception thousands of years ago (
Lymer and Oats 2009). Taxes are an essential tool for governments to regulate the macroeconomy, promote investment, control inflation, and redistribute wealth and income in society. Today the role of government in countries is increasing, and they have to collect more taxes to finance their activities. Even so, governments are finding it difficult to collect the taxes they need for various reasons. One of the main reasons that must be mentioned is taxpayers’ non-compliance. Tax compliance is the extent to which taxpayers comply with their tax obligations as set out in tax law (
James and Alley 1999); taxpayers file tax returns appropriately and fulfill their tax obligations according to regulations tax law (
Hamm 1995). Voluntary tax compliance is the correct, complete, and timely payment of taxes without the need for coercive efforts by the government (
Kirchler et al. 2008). For the voluntary system to work effectively, taxpayers must trust that taxes are levied relatively and that everyone pays their share. They will voluntarily comply because they feel obligated to do so as community members (
Kirchler et al. 2008). The fact shows that, similar to some other developing countries, taxpayers’ non-compliance is always a challenge for the government and policymakers of Vietnam because it is subject to influence by many different factors. In Vietnam, tax violations have been common in almost all taxes in recent years. Tax fraud is becoming more complicated; the scope and the scale is getting bigger, and the tricks are getting more sophisticated. To overcome this problem, the Vietnamese government has introduced many measures to limit tax non-compliance as well as improve people’s understanding of tax laws, awareness of their rights, and obligations and responsibilities, thereby helping the government improve public revenues to perform management functions for socio-economic stability and development. To ensure financial and budget resources to contribute to the implementation of socio-economic development goals and tasks for the years 2021–2030, the Government of Vietnam has approved a financial strategy for 2030, according to which the rate of mobilization to the state budget from taxes and fees in the 2021–2025 period is about 13–14% of the GDP and about 14–15% of the GDP in the 2026–2030 period (
The Prime Minister 2022). However, with the peculiarity of being a developing country, in the past, Vietnam’s tax system has regularly undergone legal amendments and mainly focused on law enforcement as a remedy to make sure the tax system works appropriately. Therefore, many taxpayers have not supported voluntary tax compliance, and they seem to be facing specific difficulties (for example, tax knowledge is limited, they have to update too many changes due to legal changes, and tax authorities still use administrative orders to impose unfair treatment on taxpayers, etc.). This can be considered one of the difficulties and challenges of the internal weaknesses of mechanisms and policies that the Vietnamese government has not thoroughly resolved. Therefore, the question for the government and the planners is how to make taxpayers comply voluntarily without using mandatory measures. To solve this problem, the Vietnamese government needs to perfect the tax administration institution to ensure synchronization, publicity, transparency, and fairness, apply risk management in tax administration and create favorable conditions for voluntary compliance by taxpayers. At the same time, concretize action plans through reforming administrative procedures to increase satisfaction, create taxpayers’ confidence in the government, and improve the tax morale of the people. On the other hand, in recent years, many studies have analyzed factors affecting taxpayers’ tax compliance behavior. Some studies have considered non-economic factors such as psychological, ethical, and social factors affecting the tax compliance behavior of taxpayers. Even so, the results of the studies still have some disparities and are inconsistent. Furthermore, previous studies on tax compliance and voluntary tax compliance were mainly conducted in developed countries with synchronous infrastructure and a fairly complete tax law system. Research on tax compliance, especially voluntary tax compliance in countries with economies in transition such as in Vietnam, is still quite limited. Therefore, to help carry out the above efforts, this study examines non-economic factors affecting taxpayers’ voluntary tax compliance behavior in small and medium enterprises (SMEs), that is, which factors motivate taxpayers to comply with tax laws compliance with the tax system or what factors influence taxpayers’ non-compliance with the tax system. This study shows that all six factors included in the research model affect SMEs’ voluntary tax compliance behavior, including the possibility of tax inspection and audit, social norms, tax knowledge, personal norms, perception of the tax system’s fairness, and tax service quality. The findings of this study provide evidence to help the government, policymakers, and tax authorities in Vietnam combine measures to solve these difficulties in system development or enact tax policies that promote voluntary tax compliance by taxpayers.
2. Literature Review
Compliance behavior has been applied by
Becker (
1968) in the study of crime and punishment: an economic approach. In his approach, Becker assumed that tax compliance behavior is determined by the monetary benefits received. Individuals will commit an offense when their expected benefits outweigh the possible benefits of doing other things through lawful activities within a certain period. Taxpayers will evade taxes if the consequences of being caught and punished are less than the amount evaded. Then,
Allingham and Sandmo (
1972) extended and developed a formal model for analyzing tax evasion (economic deterrence model). The economic deterrence model is believed to be the first to study tax compliance and examine the effectiveness of deterrence through sanctions for illegal behavior, such as taxpayers’ non-compliance is based on choice under risk and uncertainty.
Allingham and Sandmo (
1972) assume that taxpayers are utility maximizers with a realistic knowledge of the penalty and the likelihood of detection. The conventional deterrent model emphasizes sanctions as a critical determinant in combating tax non-compliance issues. However, introducing stringent punishment will not be practical or effective as a deterrent if the violator knows that the possibility of detection is very high. Deterrence is approached in punitive and persuasive ways (
Fischer et al. 1992). In which sanctions focus on stricter and harsher penalties to punish non-compliance; method of persuasion leaning toward moral values. The persuasion measure assumes that compliance will be achieved when tax authorities attract the tax morale of taxpayers. There are mechanisms and policies to encourage, support, and create favorable conditions for taxpayers to comply voluntarily without having to be deterred.
Tax compliance is a fairly broad topic and is considered by many researchers, so the definition of tax compliance is determined in different ways, depending on the nature and object of study. Tax compliance can be understood as the accurate declaration of income and expenses by tax law provisions (
Alm et al. 1991), ensuring on time without the authorities’ tax managers (
Jackson and Milliron 1986). Tax compliance reflects a taxpayer’s willingness to pay taxes (
Kirchler 2007) under tax law to achieve a country’s economic equilibrium (
Andreoni et al. 1998). However, a taxpayer’s ability and willingness to comply with tax laws is determined by the ethics, regulatory environment, and other situational factors at a particular time and place (
Song and Yarbrough 1978). Taxpayers will make a tax compliance decision by weighing the risks encountered with the expectation of benefits from unreported income (
Allingham and Sandmo 1972). Voluntary intention to comply is described as an interaction between a taxpayer’s trust in the government and the authority’s right to monitor taxpayers. When trust in the authorities is high, taxpayers will have a voluntary intention to pay taxes. Voluntary compliance stems from a taxpayer’s willingness to cooperate skillfully and a moral obligation to contribute to the public good. Taxpayers consider it an obligation as a citizen even if tax audits do not exist; they are sure they are doing the right thing even though others are not doing it; they want to help support the state and other citizens as well as contribute to the good of all (
Kirchler and Wahl 2010), so voluntary tax compliance is primarily determined by the taxpayer’s trust in the tax authorities (
Kirchler et al. 2008). Taxpayers voluntarily pay taxes even under low tax enforcement because of their intrinsic motivation, stemming from the perception that paying taxes is an obligation (
Cummings et al. 2009), which shows that tax morale has a positive influence on tax compliance behavior (
Alabede et al. 2011;
Richardson 2006). The term “tax morale” has been used by
Luttmer and Singhal (
2014) as a shorthand for any such nonpecuniary factors as well as deviations from expected utility maximization. Types of intrinsic motivation can cause people to comply with laws and expectations. Other forms of intrinsic motivation are feelings of pride and a positive self-image often associated with honesty, civic duty, and altruism toward others. Individuals may feel guilt or shame for not complying. In addition, they may comply due to reciprocal motives: the willingness to pay taxes in exchange for benefits that the state provides to them or others even though their monetary rewards will be higher if they do not pay taxes; their willingness to pay taxes depends on the individual’s relationship to the state and not on the direct relationship of the tax benefit, or they may be influenced by peer behavior, and the possibility of social recognition or punishment from peers, cultural or social norms may influence the strength of motivations intrinsic, reciprocal motivation or sensitivity to peers. This shows that tax morale plays a significant role in tax compliance behavior. In another aspect,
Doerrenberg and Peichl (
2018) add a reciprocity component by reminding participants that tax compliance and government services are closely linked, and reciprocity increases tax morale more than standard social treatment. In addition, the authors found that risk aversion is positively correlated with tax morale. In a study in a developing country that belongs to the Association of South East Asian Nations and has some conditions similar to Vietnam,
Taing and Chang (
2020) confirm that a positive attitude towards tax (tax morale) significantly affects the compliance intention of Phnom Penh residents, Cambodia. Positive tax morale is crucial to improving the tax compliance of taxpayers.
7. Conclusions and Recommendations
Taxes are considered the main source of budget revenue of a country, an important tool for the government to regulate the macroeconomy, promote investment, redistribute wealth and income in society, etc. Therefore, the issue of tax compliance is of great interest to policymakers in countries around the world, especially in developing countries. One of the main problems plaguing policymakers in developing countries is coming up with solutions to encourage higher levels of tax compliance. Stemming from issues of particular interest to the government and policymakers in Vietnam, this study examines non-economic factors affecting the voluntary compliance behavior of SMEs in Vietnam. The data used in the study were collected through a survey of managers (directors, deputy directors, chief accountants) and tax accountants at SMEs in the provinces and cities in Vietnam and processed by statistical software SPSS 20. The results of linear regression analysis confirm that:
The possibility of tax inspection and audit strongly influences taxpayers’ voluntary tax compliance behavior. Taxpayers all said that they are aware of the heavy fines as well as the adverse consequences that may be encountered if the tax authorities detect that they do not comply with the tax through the inspection. Therefore, tax authorities and related agencies need to strengthen tax inspection and examination in terms of both quantity and quality and, at the same time, increase the level of penalties if taxpayers are found to have violated tax laws in order to improve voluntary tax compliance of taxpayers.
The tax knowledge of many taxpayers is still limited, leading to their awareness and attitude toward tax compliance being insufficient. Therefore, to limit violations and promote voluntary tax compliance, tax authorities and related agencies need to have solutions to improve taxpayers’ tax knowledge by simplifying administrative procedures and strengthening training, propaganda, and dissemination of tax policies, thereby improving the compliance attitude of taxpayers.
Currently, the social norms of many taxpayers support tax avoidance; they have not considered tax compliance behavior as ethical behavior but only consider it a mandatory action according to the provisions of the law. Tax compliance has not been considered a standard of behavior of taxpayers in a social community, so the social criticism of tax non-compliance will be the most severe punishment. Therefore, policymakers and tax authorities need to pay attention to improving the tax culture in implementing tax management strategies, thereby creating a culture of tax compliance for people and businesses.
The tax system’s fairness is being affected because some officials in the tax authorities treat taxpayers with an unfriendly attitude, and a lack of close coordination causes difficulties for taxpayers, even negative situations occur. Therefore, policymakers and tax administration agencies need to continue to promote tax system reform and administrative procedure reform and strengthen the discipline of tax administrators in accessing the tax laws of taxpayers, avoiding unnecessary barriers. On the other hand, the government needs to strictly control and transparently spend public spending so that taxpayers feel the tax system is fair to them, thereby encouraging them to voluntarily comply with tax laws.
The personal norms of many taxpayers are not good, and they have not considered tax compliance behavior as ethical behavior but only consider it a mandatory action according to the provisions of the law. As a result, many taxpayers are putting their personal or business interests first instead of the good of society. Therefore, policymakers and tax administration agencies should continue to propagate to the people to understand the rights and obligations of tax payment of citizens, the role of taxes in socio-economic development, and protect the legitimate interests of each individual. In addition, these agencies need to develop soft skills training programs for learners who have a sense of compliance with the law, in which tax compliance is essential and should be better conducted. In the long term, this will improve people’s knowledge and raise the tax compliance consciousness of the whole society.
In recent years, the tax service quality in Vietnam has improved significantly; however, the quality is still not high, creating trust, cooperation, and the satisfaction of taxpayers, affecting the behavior of voluntary tax compliance by taxpayers. Therefore, to increase voluntary tax compliance, policymakers and tax authorities need to focus on reforming tax administrative procedures and building and developing human resources in the tax industry to ensure professionalism to promptly solve problems, create comfortable psychology for taxpayers when working in person or an electronic environment, thereby building trust and creating a good image for tax authorities. In addition, tax authorities need to invest in equipment and facilities for the most effective electronic tax declaration and payment. In addition, tax authorities need to regularly review to have solutions to remove difficulties and obstacles of taxpayers in implementing tax policies to create favorable conditions for taxpayers to comply with tax obligations.
Although the findings of this study have achieved certain results aimed at helping policymakers and tax authorities incorporate measures to address these difficulties in system development or decision-making tax policies that promote voluntary tax compliance by taxpayers. However, this study still has some limitations, and further studies should consider expansion that will provide more valuable results, such as consider increasing the number of non-economic factors such as gender, age, ownership structure, etc.; expanding the sample size to represent all taxpayers; focus on each specific type of enterprise, such as state-owned enterprises, private enterprises, foreign-invested enterprises, etc.