The content of the thesis includes: systematizing theoretical basis, original theories on tax compliance and factors affecting tax compliance; study the influence and influence of each factor on tax compliance behavior of Vietnamese enterprises in Hanoi city. Proposing solutions to perfect tax policies and laws to create favorable conditions for enterprises to comply with tax laws.
1 INTRODUCTION system and the same entity often have the same tax payment and compliance This makes the research sample in Hanoi highly representative Overview of the research The research Factors affecting tax compliance of Vietnamese enterprises: a case study in Hanoi aimed at investigating the relationship and extent of impact of factors influencing tax compliance of taxpayers The main research methods were qualitative research and quantitative research combining with Structural Equation Modeling (SEM) With a large sample combined with expert interviews, this study pointed out the relationship and extent of influence of research factors on tax compliance Research results were the basis for proposing solutions to enhance tax compliance of taxpayers The urgency of the topic Tax is considered the main source of income of the State budget, an important tool for the State to regulate the macro-economy, promote investment, prevent inflation, protect domestic production, guide production and consumption, redistribute wealth and income in society The general trend of the tax industry in the world aims at improving the relationship between tax collectors and taxpayers and changing from “confrontation” to “companion” for the purpose of implementing the common tasks of the State The mechanism of self-assessment tax is considered as an advanced tax management mechanism applied in many countries around the world However, in case taxpayers who not comply with tax requirements or with weak tax administration capacity, frauds of taxpayers are unable to detected, the mechanism of self-assessment tax will not work, even resulting in losses of the tax revenue of the State budget The tax administration strategy of many countries currently aims at studying the factors that affect tax compliance The purpose of this strategy is to increase the voluntary compliance of enterprises and to change the tax compliance behavior of enterprises Hanoi is both the capital and the leading economic center of the country This research evaluated factors affecting tax compliance behavior of taxpayers to propose appropriate and effective conducts in practice of organizing tax administration which is the core task of tax management agencies in Hanoi On the other hand, most large enterprises in Ho Chi Minh City and Northern provinces have branches, subsidiaries, affiliated facilities or representative offices in Hanoi In addition, based on in-depth interviews, it is noted that units in the same There have been many studies on tax compliance but the direction and extent of impact are inconsistent and different in each specific research context In Vietnam, research on tax compliance using quantitative research method combined with quantitative research method is limited Based on the reasons above, the author decided to choose the topic: Factors affecting tax compliance of Vietnamese enterprises: a case study in Hanoi Research objectives, research questions (1) Systematizing the theoretical basis, original theories of Tax Compliance and factors affecting tax compliance (2) Investigating the impact and extent of impact of each factor on tax compliance behavior of Vietnamese enterprises in Hanoi city (3) By examining the research model on the research sample, the study aims at investigating the relationship between influential factors and factors of tax compliance in the context of a transition economy like Vietnam to find out the differences with research in developed economies (4) Proposing some suggestions to improve tax policies and tax laws; proposing solutions to improve tax administration activities, creating optimal conditions for enterprises to comply with tax laws Research scope and subject Research scope: probability of getting tax inspection, sanctions, social norms, corporate reputation, personal Norms, ownership, voluntary compliance, compulsory compliance Research subject: Vietnamese enterprises in Hanoi Methodology 5.1 Desk research Literature review of a number of collected documents and researching on a number of reputable websites such as https://scholar.google.com.vn/, http://search.proquest.com/, http://www.sciencedirect.com, provided the main research directions on tax compliance in the world, the original theories used in those studies Based on that, the research direction of this study was established, clarifying concepts of factors of tax compliance as well as factors affecting tax compliance Thus, the research CHAPTER 1: LITERATURE REVIEW model and preliminary research hypotheses were established 5.2 Qualitative research Based on the research model built in the previous step, the author conducted indepth interviews with a number of tax experts, tax policy advisors, employees of tax agencies and enterprises implementing tax obligations to assess factors in the research model, whereby, make necessary adjustments whether to add or remove certain factors to suit the actual situation of research in Hanoi The results of this phase will help the author build a research model that is more suitable to the research context, adjusting measurement scales of variables to make them more reliable with high convergent values In addition, interviews with taxpayers were conducted to find out the current tax compliance status of enterprises from the perspective of taxpayers 5.3 Quantitative research The questionnaires were developed based on the literature review and previous research steps to conduct large-scale data collection with large sample size to test the proposed research model and research hypotheses Some quantitative research tools used by the author such as: Descriptive statistics of research sample; Multivariate regression analysis; Variance Analysis; Exploratory Factor Analysis (EFA); reliability analysis with Cronbach’s Alpha, Confirmatory Factor Analysis (CFA) and Structural Equation Modeling (SEM) 5.4 Research structure The research consists of chapters, specifically: Chapter 1: LITERATURE REVIEW Chapter 2: THEORETICAL FOUNDATION, RESEARCH MODEL AND RESEARCH HYPOTHESIS Chapter 3: RESEARCH DESIGN Chapter 4: RESEARCH CONTEXT AND DATA ANALYSIS Chapter 5: RECOMMENDATIONS AND CONCLUSION 1.1 Literature review of research in Vietnam In Vietnam, there have been a number of authors studying tax compliance However, previous studies of tax compliance in Vietnam have not generally examined the factors of tax compliance behaviors in Vietnam Many previous studies on tax compliance in Vietnam stopped at providing descriptive statistics, description, and did not give a comprehensive view on tendency of tax compliance of taxpayers The scope of previous studies was restricted to scope of one district, one town or only examining one aspect of tax compliance of enterprises and did not investigating factors affecting tax compliance with a wide range Factor of corporate reputation was restrictedly mentioned in previous studies Therefore, the relationship, impact or results of this problem seem not to fully verified and evaluated 1.2 Literature review of research in the world 1.2.1 Research directions on tax compliance 1.2.1.1 Research on tax compliance based on economic theories: Research in this direction supposed that taxpayers always try to find ways to minimize their taxable incomes and it is influenced by factors such as compliance costs and benefits of tax evasion Taxpayers may bear the risk by avoiding all or part of their actual income if their tax records are not examined However, in the case of being inspected, compliance is better because paying a penalty for tax evasion will result in a greater reduction of income than a tax payment Studies in this direction assumed that tax evaders will maximize the benefits in tax reporting and tax compliance because the economic benefits due to tax evasion are greater than the costs incurred Although there are many advantages in determining factors affecting tax compliance, research based on economic theories did not mention the moral and psychological factors of taxpayers Research methods from the perspective of economic theories always assume that business ethics is not important in tax compliance decisions In fact, besides the factors of economic benefits, tax compliance is also greatly influenced by the psychological, moral factors of taxpayers Therefore, researchers continue to study the impact of psychological and social factors on tax compliance of taxpayers 5 1.2.1.2 Research on tax compliance based on social, psychological and behavioral theories CHAPTER 2: THEORITICAL FOUNDATION, RESEARCH MODEL, RESEARCH HYPOTHESES Studies in this direction suggested that the human factor is the decisive factor in tax compliance decisions The drawback of this approach is that psychological and behavioral variables of taxpayers are not available in tax return and audit reports but they are collected from survey, besides, one shortcoming of survey data is that they are based on self-report, and information provided may be inaccurate and attitude of participants may be inconsistent (Andreoni et al., 1998) 1.2.1.3 Research on tax compliance combining economic theories and social, psychological, and behavioral theories In the modern direction, many studies on tax compliance are based on both economic factors and psychological and social factors In other words, tax compliance can be explained by many factors such as individual motivators, factors beyond the conventional economic crime method including behavioral theories proposed by psychologists, sociologists, and other social scientists Studies on the factors affecting tax compliance of taxpayers are continued by researchers 1.2.1.4 Research on tax compliance based on examining characteristics of enterprises Studies in this direction suggested that the characteristics of enterprises and demographic factors also have certain impact on the level of tax compliance of firms Characteristics of enterprises are reflected by the properties such as the complexity of the organizational structure; type of business; business scale; operating time of the enterprise; performance efficiency, age and gender of the business owner Experimental studies provided evidence that women often have less tax frauds than men and older people have better taxes compliance than young people 1.2.2 Models in research on tax compliance Economic-sanction model Economic-psychological model Behavioral model 2.1 Concepts Tax compliance: (Alm et al., 1992a) provided a concept in which tax compliance is understood as the accurate reporting of all incomes according to tax regulations The definition of Alm et al., (1992a) covers all the implications of tax compliance and in accordance with tax laws in Vietnam, therefore, this definition of Alm et al., (1992a) is used in this research Tax evasion is the concept combining the factors of social sciences factor and the economic crimes It is defined as the use of methods that the law does not allow to reduce the tax payable Surtees and Millord (2004) provided that tax evasion is a deliberate and dishonest act when taxpayers declare a lower income or increase costs to reduce tax burdens Elffers et al (1987) stated that tax evasion is a deliberate behavior to reduce tax burdens illegally Legally, tax evasion is equivalent to tax noncompliance Tax avoidance: Unlike tax evasion, which is considered a violation of law, tax avoidance is considered an art allowing taxpayer not to pay taxes without violating any tax laws and not reduce tax burdens (Paulauskas, 2006) Slemrod and Yitzhaki (2002) provided that whether it is intentional or unintentional, any action of a taxpayer causes a reduction of the tax payable, it must be considered a tax evasion However, there are also opinions that tax avoidance in some aspects is legal and is not equivalent to tax noncompliance 2.2 Classification of tax compliance Brown and Mazur (2003) divided tax compliance into three categories which are payment compliance, filling compliance, reporting compliance Filing compliance is the type of compliance related to the percentage of taxpayers filing tax returns When calculating the rate of tax returns, the denominator is always the number of taxpayers who have registered tax but in fact, this denominator must be larger because there is a part of business people who have not registered with the tax authorities The author found classification of tax compliance in three categories like Brown and Mazur (2003) is suitable with current situation of tax compliance in Vietnam thus, classification of Brown and Mazur (2003) was selected behavior This theory assumes that before deciding on a certain behavior people will to analyze research context in this study consider and examine possible consequences and results of implementing those behaviors and people will choose to perform the action which is capable of bringing the desired results 2.3 Theories used in research on tax compliance 2.3.1 Expected Utility Theory This theory assumes that individuals behaving rationally are economic and “rational” people and irrational behaviors will be eliminated or will not play an important role or have major impact as in the short term they will be eliminated by market pressures Applying to tax compliance behavior, expected utility theory suggests that taxpayers will decide between risk and uncertainty conditions by comparing their expected utility values Taxpayers will carefully consider the options for tax evasion and will choose which cases yield the highest benefits and are least likely to be detected 2.3.2 Prospect theory The main content of prospect theory is as follows: Human behavior is often performed by paying attention to gains and losses Prospective theory has been applied in many studies on tax compliance This theory assumes that sanctions, including sanctions and investigations, are the best ways to handle tax noncompliance 2.3.3 Expectancy theory This theory assumes that people decide to act in a particular direction, this action is based on other actions in which the choice is based on the desire in perception of that 2.3.6 Institutional Anomie Theory (IAT) This theory assumes that individuals make decisions based on socialized values, which separately may be contradictory but together, balances each other out, producing behavior considered “normal” by society When one person holds an imbalanced set of values, decisions made on that set may produce deviant behavior, such as everyday crime (Itashiki, 2011) Since the moral values of society decline, the possibility of deviant acts, such as tax evasion, may increase This situation particularly increase when existing cultural values emphasize on increasing material and economic rewards and considering removing ethics in society and organizations 3.3.7 Agency theory Agency theory explains the essential relationship between the principal, agency and a third party Jackson and Milliron (1986a) provided that there is a special relationship with tax compliance studies and affirmed that the role of taxpayers is agency of taxpayers Most studies on tax compliance provided that corporate managers representing shareholders are always encouraged to take measures to maximize the benefits of individual regarding the outcome of the chosen behavior enterprises However, in another aspect, Weber (1978) believed that human behavior has its own logic and sometimes does not focus on economic benefits 2.3.4 Deterrence theory 2.4 The proposed conceptual framework The deterrence theory assumes that people will choose to comply with or violate the law after calculating the benefits and consequences of their actions There are two basic types of deterrence: common deterrence and specific deterrence There are many empirical studies on tax compliance proving that sanctions positively affect taxpayers’ attitudes and can guide taxpayers’ behavior Studies showed that deterrence theory will have a positive impact on tax compliance behavior if there is certainty that violators will be punished When sanctions are implemented loosely, it increases the chances of taxpayers’ non-compliance 2.3.5 Theory of reasoned action This theory examines the relationships between beliefs, attitudes, motives, intentions and behaviors Specifically, intention is the preceding factor which leads to Factors are selected and put into the following conceptual framework: 10 H4b Probability of getting tax inspection Compulsory compliance H5 H6a Tax compliance Sanctions H6b H7 Social norms Corporate reputation There is a relationship between corporate reputation and compulsory tax compliance There is a relationship between personal Norms and voluntary tax compliance There is a relationship between voluntary tax compliance and tax compliance There is a relationship between compulsory tax compliance and tax compliance There is a relationship between compulsory tax compliance and voluntary tax compliance Voluntary compliance + + + + + CHAPTER RESEARCH DESIGN 3.1 Qualitative research The objective of qualitative research is to understand the current situation of tax compliance of Vietnamese enterprises in Hanoi, and aims at assessing factors in the research model Consultation on factors affecting tax compliance behavior in the model was conducted on many subjects who are involved in tax enforcement such as Personal Norms Figure 3.3: The proposed conceptual framework 2.5 Research hypotheses regarding impact of factors on tax compliance of Vietnamese enterprises Table 2.2: Summary of research hypotheses Symbol H1a: H1b: H2 H3a H3b H4a Content There is a relationship between probability of getting tax inspection and voluntary tax compliance There is a relationship between probability of getting tax inspection and compulsory tax compliance There is a relationship between sanctions and compulsory tax compliance There is a relationship between social norms and voluntary tax compliance There is a relationship between social norms and compulsory tax compliance There is a relationship between corporate reputation and voluntary tax compliance Desired direction of impact + + + + + + tax policy makers, tax officers and Vietnamese enterprises fulfilling their tax obligations Then, interviews were conducted to assess the concepts, factors, relationships between factors in the model From the in-depth interview, it was figured out that ownership is a characterized factor of Vietnam By continuing in-depth interviews about the factor of ownership and seeking information in general, the factor of ownership was added into the research model Probability of getting tax inspection Sanctions 11 12 Compulsory tax compliance H6a H6b Tax compliance Social norms Corporate reputation Voluntary tax compliance H7 voluntary tax compliance There is a relationship between voluntary tax compliance and tax compliance There is a relationship between compulsory tax compliance and tax compliance There is a relationship between ownership and voluntary tax compliance + + + 3.2 Quantitative research Quantitative research was conducted in the following order: Table 3.2: Steps of conducting quantitative research Personal Norms Step Content Establishing - From the literature review and qualitative research, select measurement scales suitable for the research model measurement scales Ownership Figure 3.1: The conceptual framework after conducting qualitative research - Ensure Validity of measurement scales - Ensure Reliability of measurement scales Table 3.1: research hypotheses after conducting qualitative research Symbol H1a: H1b: H2 H3a H3b H4a H4b H5 Content There is a relationship between probability of getting tax inspection and voluntary tax compliance There is a relationship between probability of getting tax inspection and compulsory tax compliance There is a relationship between sanctions and compulsory tax compliance There is a relationship between social norms and voluntary tax compliance There is a relationship between social norms and compulsory tax compliance There is a relationship between corporate reputation and voluntary tax compliance There is a relationship between corporate reputation and compulsory tax compliance There is a relationship between personal Norms and Desired direction of impact + Evaluating measurement scales + + + + + + After ensuring the validity of the scales, questionnaires were distributed to implement a pilot test + Each variable must have Cronbach alpha >0.7 to ensure reliability and consistency of scales + If above requirements are not met, the author must conduct literature review again, considering translation and discuss with experts + + - The scales in English will be translated into Vietnamese by two independent English experts to ensure the content of the scales Official survey - Complete the questionnaires to distribute them in a wide range - Collect data Data analysis - Apply SPSS, AMOS to conduct regression analysis and SEM for the proposed model 13 CHAPTER 4: RESEARCH CONTEXT AND DATA ANALYSIS 4.1 Current status of tax compliance of Vietnamese enterprises in Hanoi from the statistics of tax authorities In general, from the data of the tax authorities, status of tax compliance of Vietnamese enterprises in Hanoi includes the status of filing compliance, reporting compliance and payment compliance The results showed that current status of tax compliance of taxpayers in Hanoi was relatively good 4.2 Current status of tax compliance of Vietnamese enterprises in Hanoi from the perspective of enterprises paying taxes In order to examine the general assessment of enterprises on current status of tax compliance, the author directly interviewed 20 enterprises who are paying taxes According to the report on current status of tax compliance of Vietnamese enterprises in Hanoi from the interview of 20 enterprises, the results showed that most interviewed enterprises properly complied with tax filing and tax payment on time However, when conducting in-depth interviews on reporting compliance, it was found that the majority of interviewed enterprises said they approved of the incorrect tax reporting which leads to lower tax payable or agreed with the “rationalization” of documents This does not necessarily stem from the reason that taxpayers not know the tax regulations but because of many factors such as: Consulting with similar enterprises, paying unofficial expenses Besides, it was noted that the satisfaction level of interviewed enterprises with tax authorities is not high 4.3 Results of model testing and hypothesis testing 4.3.1 Evaluate reliability of scales with Cronbach’s alpha The results of the reliability test of scales showed that all scales are measured by observed variables independent with reliability and values of Cronbach's alpha are greater than the required value of 0.7 Moreover, observed variables significantly interrelated, the value of corrected item-total correlation of each variable is greater than or approximately equal 0.5 It means variables are consistently measuring the same concepts for the total factor, with statistical significance 14 4.3.2 Exploratory Factor Analysis (EFA) EFA was conducted simultaneously on all observed variables The results are shown in the following table: Table 4.23: Results of exploratory factor analysis for the data set with all variables KMO = 758 Bartlett’s Test Sig = 0.000 Component Eigen – Value Total % of variance Cumulative % 4.614 23.069 23.069 3.099 15.496 38.565 2.614 13.072 51.637 2.081 10.406 62.043 1.859 9.294 71.337 797 3.985 75.323 630 3.150 78.473 575 2.875 81.348 524 2.619 83.967 10 425 2.127 86.094 11 392 1.959 88.052 12 381 1.906 89.958 13 370 1.848 91.806 14 351 1.755 93.561 15 342 1.708 95.269 16 269 1.346 96.616 17 238 1.192 97.808 18 186 929 98.737 19 183 916 99.653 20 069 347 100.000 Extraction Method: Principal Axis Factoring The results showed that all 20 items of factors load on five factors with Eigen-Value> 1, KMO = 0.758> 0.5 The Barlett test is significant at p = 0,000≤ 5% for the data measuring factors: Reputation, sanctions, social norms, personal Norms and probability of getting tax inspection are appropriate The observed variables of the factors are strongly correlated 20 observable variables measuring the mandatory tax compliance and voluntary tax compliance are appropriate and CFA is conducted 15 16 4.3.3 Multivariate regression analysis on impact of factors on tax compliance behavior of taxpayers between MCM and voluntary tax compliance is low (-0.09), this indicates that social *Coefficients Table 4.25: Coefficients of independent variables with compulsory tax compliance Model 1 Unstandardized coefficients B Std.error Standardized coefficients Beta (Constant) 2.035 387 MKT 092 045 140 MCM 125 054 156 MXP 248 056 298 MDT 077 070 077 MDDT -.064 055 -.082 Dependent variable: compulsory tax compliance (TTBB) T 5.253 2.062 2.313 4.441 1.103 -1.173 Sig .000 041 022 000 271 242 Based on the above table, sig values of MDDT, MDT > 0.05, so these variables are removed from the model The research hypothesis “H4a: There is a relationship between corporate reputation and mandatory tax compliance” with Sig = 0.271> 0.05 is not statistically significant and should not be used in this study norms is not associated with voluntary tax compliance in this study The research hypothesis “H3a: there is a relationship between social norms and voluntary tax compliance” with Sig = 0.890> 0.05 is not statistically significant and not supported in this study MDDT has sig value = 0.1 approximately equal statistical significance of 10% so this variable is kept and put into SEM After getting firm evidence, the variable will be kept or removed Continue analyzing coefficients between TTBB, TTTN with dependent variable TTT, the results are shown in the following table: Table 4.27: Coefficients between tax compliance and voluntary tax compliance Unstandardized coefficients B Std.error Model (Constant) 1.125 TTTN 407 Dependent variable: tax compliance (TTT) Table 4.26: Coefficients of independent variables with voluntary tax compliance Unstandardized coefficients Standardized coefficients B Std.error Beta T Sig (Constant) 1.184 430 2.753 006 MKT 117 050 152 2.358 019 MCM -.008 060 -.009 -.139 890 MXP 065 062 067 1.045 297 MDT 426 077 367 5.510 000 MDDT 101 061 111 1.654 100 Dependent variable: Voluntary tax compliance (TTTN) The above table shows that sig values of MXP, MCM, MDDT > 0.05, so these variables are removed from the model Beta coefficient reflecting the relationship Model 391 4.390 5.963 Sig .000 000 Standardized Unstandardized coefficients B correlation with compulsory tax compliance with significance value < 0.01 The following table shows impact of independent variables on voluntary tax compliance: 256 068 T Table 4.28: Coefficients between tax compliance and compulsory tax compliance Model Sig values of MCM, MKT, MXP < 0.05 so these variables are kept as they have correlation with compulsory tax compliance in which sanctions has the highest Standardized coefficients Beta (Constant) TTBB coefficients Std.error 1.912 324 196 087 Beta T 158 Sig 5.907 000 2.241 026 Dependent variable: tax compliance (TTT) From the above table, it is shown that both independent variables voluntary tax compliance and compulsory tax compliance have impact on the dependent variable tax compliance variable because both Sig values are less than 0.05 4.3.4 Confirmatory Factor Analysis (CFA) of independent variables The regression results of observed variables in each latent variable after linking errors are shown in the following table: Table 4.49: results of model fit compared with actual data after linking e2 and e4 Chi square Df Chi-square/df GFI TLI CFI RMSEA P 265.132 158 1.678 0.887 0.939 0.949 0.059 000 17 18 The values of TLI (Tucker-Lewis Index), CFI (Comparative Fix Index) show good With variable of tax compliance, both variables voluntary tax compliance and results with values > 0.9 In addition, the GFI (measuring goodness of fit) = 0.887, although it is improved but still not greater than 0.9 However, the GFI with value of 0.887 is still acceptable Moreover, Dmin/Df = 1.678