Analysis of determinants influencing tax behaviour in SMEs

Abstract

This study investigates the determinants influencing tax behavior among small and medium-sized enterprises (SMEs) through an empirical approach that includes a structured questionnaire targeted at SME administrators. A comprehensive econometric model employing ordinal least squares (OLS) regression was utilized to analyze responses from 141 SME administrators, providing a robust evaluation of how various factors influence SME tax behavior. Key variables examined include perceived tax fairness, complexity of tax regulations, financial literacy, strategic importance of tax planning, and external pressure and influence. The results reveal that perceived tax fairness and financial literacy significantly enhance tax compliance, while the complexity of tax regulations shows a complex relationship with tax behavior. Interestingly, the strategic importance of tax planning did not significantly impact tax behavior, but external pressures and enforcement showed a strong positive effect. These findings provide vital insights for policymakers and tax authorities to design interventions that could lead to improved compliance and strategic tax planning among SMEs. CZU: 336.221:[334.012.63+334.012.64]; JEL Classification: M41; DOI: https://doi.org/10.53486/isca2024.23