The Effect of Deterrence Factors on Discourage Shadow Economy Level and Tax Evasion

Abstract

A complex and great challenge cutting across almost all types of economies from developed to developing economies is the phenomena of shadow economies. A number of factors are responsible for peoples' involvement in such practices of shadow economies around the world. One of such factor is government policies especially those concerning taxation and regulation. Shadow economy practices such as tax evasion, results in the loss of tax revenues for the government and consequently affect government performance. The implications of loses in tax revenue is the incapacitation of the government's ability to finance projects essential for economic growth and societal welfare. The current study revealed two major variables that can possibly influence the shadow economy level. The variables are: firstly, the probability of detection and secondly, the penalty rate. The present study therefore builds on the existing body of knowledge on taxes from a deterrence perspective. Since shadow economy is subject to individuals, this suggests that deterrence factors should be given priority, compared to other factors. The proposed framework, from a deterrence perspective, would benefit tax administrators in comprehending and mitigating the phenomenon of a shadow economy.

Examining the Moderating Effect of Tax Knowledge on the Relationship between Individual Factors and Income Tax Compliance Behaviour in Malaysia

“…Two courses: providing "Economic benefits", and "Social benefits", of development are executed by the Malaysian federal government. The economic benefits to the nation are carried out by collecting the revenue, allocating respective fund for the national economy, and distributing the earned revenue to the national economy (Abuamria, 2019). Injects back a part of the revenue into economy, launch provisions of goods and services and allocates the revenue to accomplish the government's objectives may the schedules performed by the government of Malaysia, as mentioned in the budget or any other government official schedules, circulars, documents, etc.…”

The Impact of Tax Ethics and Knowledge on Tax Compliance among Palestinian Taxpayers

“…As taxes are an important source of income for the state, they increase public treasury revenues. One of the countries' policies is to impose taxes in order to achieve stability and economic growth (Abuamria, 2019). On the other hand, some see it as helping to stabilize social, income redistribution among the different classes of society.…”