Tax is a major source of government revenue in any planned economic system. However, the extent to which taxpayers comply with the stipulated tax laws, thereby avoiding the need for aggressive tax planning by the government by reducing the level of recorded tax avoidance and evasion attempts, is an important factor in determining this source of revenue flow to the government. As at present no economy has recorded a hundred per cent compliance to her tax system. Hamm (1995) noted that of 117 million Income tax forms returned in April, 1995, 8.3 per cent had not accurately, declared their tax liabilities. In addition to this, approximately 7 million or 5.6 per cent did not return the income tax form. According to Singh (2003) tax compliance is a person’s act of filling the income form, declaring all taxable income, accurately and disbursing all payable taxes within the stipulated period without having to wait for follow-up actions froth the authority. Franzoni (2000, cited in BATRANCEA et al., 2012) highlights four basic rules a taxpayer should follow in order to be fully compliant with the tax law: (1) report the real tax base to the tax authorities; (2) compute correctly the tax liability; (3) file the tax return on time; and (4) pay the amounts due on time. If one of the rules is broken, the taxpayer becomes non-compliant


The ability on any tax system to generate the needed revenue for government is a function of the behaviour of the taxpayers constituting individual elements of the tax system. The behaviour of the taxpayer is a result of his/her personal norms and experiences related to a specific context. The context is the social ad economic environment and the society in general and includes the activities of the revenue body and its interactions with taxpayers (OECD, 2010). Therefore, a change in these ‘context’ can change the behaviour of the taxpayer. This is because; drivers behind tax payers’ behaviour cannot be separated from context and to influence these ‘drivers’ means a change the context (OECD, 2010). Thus, two basic approaches have been noted in the public policy literatures on determining the degree of tax compliance/non-compliance (James and Alley, 199). The first approach analyses compliance in terms of economic implications, which is based on the likely economic costs and incentives of compliance and non-compliant behaviour. This view is based on economic rationality and developed using economic analysis. The other approach examines the effects of other factors such as: age; gender; education; status and peer influence on compliance decisions, particularly as they relate to the tax payer or agencies charged with the administration of the tax system. This approach primarily deals with behavioural issues and draws heavily on concepts and researches from disciplines such as; psychology, sociology and anthropology.

These non-economic factors, which have been neglected by economists, have been introduced to explain the tax compliance by using the economic framework (Smith and Stalans, 1991). Braithwaite et al. (2003) examined such factors as the perception of justice and Feld and Frey (2007) suggested that taxpayers are prepared to comply with the tax system if they perceive the political process is fair and legitimate. The roles of individuals in society and accepted norms of behaviour have also been shown to have a strong influence (Wenzel 2004 and 2005). This all has links with the rapidly expanding literature on tax morale which might be defined as ‘an individual’s intrinsic willingness to pay taxes’ (Aim and Torgler, 2006) and which is examined further in Torgler (2007). Background factors such as cultural influence have been examined by Coleman and Freeman (1997) and Cummings et al. (2004), and so have the implications of different political systems (Pommerehne et al., 1994). More direct contributions to policy in this area have come from a number of authors. For example, one is an appeal to taxpayers’ conscience (Hasseldine and Kaplan, 1992) and also to feelings of guilt and shame (Erard and Feinstein, 1994). Others have suggested more positive help for taxpayers (Hite, 1989) and different methods of achieving this — such as the use of television to change tax payers’ attitudes towards fairness and compliance (Roberts, 1994) and information campaigns about the public goods and services paid for by taxation (Leder, et al. 2010). The studies are however inconsistent in their findings, while majority focus on the economic determinants of tax compliance behavior. It is against this backdrop that this study would attempt to explore both the behavioural and economic approaches to tax compliance.