Impact of Tax Knowledge, Tax System Complexity and Tax Fairness Perception on Compliance Behavior of a Taxpayer in KPK

Abstract

This study encompasses and aims to find the impact of tax-related knowledge, the system complexity, and tax fair perception in shaping the tax compliance behavior of taxpayers residing in Khyber Pakhtunkhwa, Peshawar, Pakistan. The theoretical framework for the study was constructed based on distributive justice theory and the theory of planned behavior. A deductive approach was adopted, and a structured questionnaire was designed and adapted for tax-payers, the survey was done based on this questionnaire to investigate the hypothesis of the study. To make an inference, ordinal regression was run to see the significance of tax knowledge, tax system complexity, and fairness perception in shaping the compliance behavior of taxpayers. The results suggested that tax compliance behavior relies on tax knowledge, tax system complexity, and tax-fairness perception of a taxpayer and all these factors play a vital role in molding the compliance behavior of a taxpayer. The results imply that to attain a more compliant tax system, initiatives should be taken to enhance the tax knowledge of taxpayers and to reduce the tax system complexity that prevails in the system, these initiatives seem to enhance a positive perception of taxpayers regarding tax system and would ultimately help the system attain a more compliant environment. The study also depicted that despite the difference among tax-payers based on their demographics; in terms of age, income, gender, and experience, all the tax-payers respond similarly when it comes to meeting their tax obligations and none of these demographic traits seem to distinguish taxpayers from one another.