The application of the theory of planned behaviour and structural equation modelling in tax compliance behaviour: a New Zealand study
Degree GrantorUniversity of Canterbury
Degree NameDoctor of Philosophy
The Theory of Planned Behaviour (TPB) has received considerable attention in the behavioural literature, but not in the tax compliance domain. The key purpose of this study is to determine the influence of selected tax compliance variables on tax compliance behaviour. The secondary objectives are to explore the applicability of the TPB in predicting and explaining tax compliance behaviour, and to provide justification for the application of Structural Equation Modelling (SEM) employing the Partial Least Squares (PLS) statistical software or PLS-Graph (which has not been widely used in tax compliance research). The results provide evidence supporting the use of PLS-Graph in undertaking SEM analysis in tax compliance research, especially when smaller samples are involved and the data collected may not be normally distributed. This study also demonstrated the wide applicability of the TPB, including its application in tax compliance research. This study modified and extended the standard TPB behavioural model with the inclusion of a number of economic and noneconomic constructs. Most of the constructs used for this study are grounded in a number of theories: Deterrence Theory; Procedural Justice Theory; and Motivational Posturing Theory; in addition to the TPB. Data to test the research hypotheses was collected using a mail and a web-based survey. The results of this study suggest that noneconomic variables, such as beliefs and attitudes, are good predictors of tax compliance behaviour. Consistent with the majority of studies, the most influential factor in predicting and explaining tax compliance behaviour (through the mediating effects of behavioural intention) is attitude towards the behaviour. Other factors such as personal, social and societal norms were also significant predictors of tax compliance behaviour. Perceived behavioural control was only significant for the taxpayers but not for the tax agents. In contrast, perception of the tax authority was significant for New Zealand tax agents, but not for taxpayers. The results also suggest that tax compliance behaviour is complex, and different determinants of compliance behaviour affects different sub-groups of taxpayers differently. The results lend further support to the literature that indicates that taxpayers are not a homogeneous group. This study also found that taxpayers and tax agents generally perceive tax noncompliance as less serious relative to a number of other similar civil offences. This perception may explain why respondents (from both sample groups) who were penalised for noncompliance felt that the penalties imposed were harsh, unfair and excessive. Overall, the current study illustrates the importance of incorporating noneconomic variables comprising beliefs, attitudes, and norms, with widely used economic variables such as penalties and other enforcement tools, for achieving an optimal compliance strategy.