Role of Tax Administration System and Public Governance on Taxpayers' Compliance Behavior, Moderating role of Religiosity

Abstract

Considering the fact that direct tax collection and tax to GDP ratio in Pakistan is very low and the budget dificit is covered using debts, which further increases the dificit in the next years. It was needed to study the tax administration system of Pakistan and its impact of compliance behavior. This study is focused on determination of the impact of tax administration system and quality of public governance on individual taxpayers’ compliance behavior, in the presence of religiosity as a moderating variable. Survey method was employed and 625 questionnaires were distributed using a self-administered questionnaire from the individuals across the five major cities of Pakistan. The response rate was 66% and 412 appropriate questionnaires were returned from the respondents. Results of this study showed that tax administration system and quality of public governance has a strong and direct impact on taxpayers’ compliance behavior whereas, religiosity has an inverse and weak impact on taxpayers’ compliance behavior. Furthermore, religiosity moderates the relationships of tax administration system from positive to negative and weaken the relationship between public governance and tax compliance behavior.