The Slippery Slope Framework of Tax Compliance

A cooperative environment can be characterized by the idea that tax authorities perform a service to the community and are part of the same community to which the individual taxpayer belongs. The approach of the authorities can be described as a “service and customer” attitude, as it is promoted in New Public Management. Authorities aim for transparent procedures and treat taxpayers with respect and support. For example, in Switzerland, friendly and respectful treatment of taxpayers by authorities has long been recognized as an important means of enhancing tax compliance (Feld and Frey, 2005). In such an environment, social distance is likely to be low, voluntary compliance is likely to prevail, and individuals are less likely to consider the opportunity for evasion and more likely to contribute their share of the obligation.

From that starting point, the SSF proceeds with the idea of tax compliance in terms of two main dimensions: tax authority power and trust in the tax authority. These dimensions and their interactions together influence the level of tax compliance (Kirchler, 2007). Here, it is assumed that tax compliance can be achieved through increasing levels of tax authority power and trust; however, increasing each dimension of tax authority power or improving trust in the tax authority will result in either mandatory compliance in the former case and voluntary compliance in the latter case. The impact of changes in one dimension is assumed to depend on the level of the other dimension, resulting in the stylized figure shown in Figure 2.4. The proposed SSF model of tax compliance is graphically represented in a three-dimensional space with tax authority power, trust in the tax authority, and tax compliance behavior as shown below:

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Figure 2.5: The Slippery Slope Framework of Tax Compliance - SSF

Source: Kirchler, Hoelzl and Wahl (2008)

The SSF model shows that under conditions where trust in the tax authority is low and the authority of the tax authority is weak, taxpayers are likely to seek to maximize their personal benefits by evading taxes, bringing compliance to a minimum. In addition, the SSF model also shows that:

(i) Moving along the left edge, along the tax authority power dimension under conditions of low trust in the tax authority, compliance increases with the tax authority's power to increase the probability of inspection and detection and to impose heavy penalties. Taxpayers have less and less incentive to evade, because the expected outcome of non-compliance falls below the expected outcome of compliance. The increase in tax authority's power leads to compulsory compliance.

(ii) Moving from the front corner along the right edge, along the trust in tax authority dimension under low tax authority power, compliance increases with the level of trust in tax authority. Increasing trust in tax authority is likely to lead to voluntary compliance behavior.

(iii) Taxpayer compliance is high under the condition of strong tax authority as well as under the condition of high trust in tax authority. However, the reasons for compliance are different and there is a qualitative difference between compulsory and voluntary tax compliance among taxpayers.

(iv) The power of the tax authority and trust in the tax authority are mutually reinforcing. Changes in trust in the tax authority are most important when power is low; however, when power is at its maximum, changes in trust in the tax authority are irrelevant because the competent authorities can enforce maximum compliance. Conversely, differences in power of the tax authority are most important when trust in the tax authority is low; however, when trust in the tax authority is at its maximum, differences in power are not important.

As a result of an overview of related research works, the author found that the SSF model has been studied extensively, especially in recent studies on tax compliance behavior (See Table 1.1 and Appendix 01) and this is also a model commonly applied to modern tax management.

2.4. Factors affecting tax compliance behavior of taxpayers

2.4.1. Tax policies and laws

According to the Tax Management Textbook, tax policy is a system of viewpoints, guidelines, and principles for regulating the income of organizations and individuals in society.

through taxes. Tax law is a system of general mandatory rules of conduct. If the State wants policies to come into life, it must institutionalize those policies into tax laws (Le Xuan Truong, 2016)

With the above understanding, it can be seen that this is one of the extremely important factors affecting compliance. The system of tax policies and laws needs to be built in a synchronous, clear, simple, transparent and fair manner, with fewer exceptions to create a favorable environment for production and business development, reduce compliance costs, reduce risks of corruption and inconvenience for taxpayers, thereby also helping to better implement tax compliance. On the contrary, if the tax law system is complicated, asynchronous, lacking in rigor and overlapping, it will increase the opportunity for taxpayers to take advantage of loopholes in the law for personal gain, reducing the management and deterrence effects of the law.

2.4.2. Tax management activities of tax authorities

Tax administration is understood as the process of organizing and implementing tax laws in economic and social life. The goal of tax administration is to ensure that all organizations and individuals of the taxpayer must fully exercise their rights and obligations according to the provisions of tax laws. To achieve that goal, the tax authority carries out the following activities:

 Tax administrative procedures : according to Le Xuan Truong (2016), tax procedures are understood as the work that taxpayers need to perform, the records and documents that need to be submitted to the tax authority or kept and presented for tax management purposes according to tax law provisions to facilitate tax declaration and payment. Therefore, tax administrative procedures directly related to taxpayers include: Tax registration procedures; tax declaration procedures, tax payment procedures and tax inspection and audit procedures. Tax administrative procedures have the effect of promoting or inhibiting taxpayer compliance. Tax administrative procedures that are easy to understand and implement create favorable conditions for taxpayers to comply with taxes and vice versa.

Propaganda and support activities for taxpayers

Tax law propaganda is an activity aimed at conveying information about tax law accurately, fully, promptly and officially to all members of society through specific forms and measures.

Tax propaganda activities include: Propagating and explaining the nature and role of taxes, social benefits obtained from the use of tax money; propagating and disseminating the content of tax policies and laws; disseminating issues related to the obligations and responsibilities of tax authorities, taxpayers and other organizations and individuals in society in providing information and coordinating the implementation of tax laws; disseminating tax procedures, regulations on handling tax law violations; praising and rewarding taxpayers who comply well with tax laws...

Meanwhile, support activities for taxpayers include contents such as guidance and consultation on tax policies and regimes; guidance and consultation on procedures and processes for tax compliance such as tax registration procedures, tax declaration, tax payment, tax exemption and reduction... guidance and consultation on how to prepare tax reporting forms; consultation on tax-related issues such as accounting, how to use and manage invoices and documents; guidance and provision of warning information on cases of tax evasion, tax fraud, sanctions for tax law violations; answering questions arising in the process of tax obligations of taxpayers... This activity can be carried out through support forms such as services to answer taxpayers' questions by phone, through direct consultations, answering by mail...

Tax declaration management

Tax declaration management is a management activity to help tax authorities grasp the entire tax registration and declaration status of taxpayers.

Tax declaration is the act of a taxpayer basing on data and the actual situation of activities that generate tax obligations to declare and determine the amount of tax payable to the State budget during the tax period according to the provisions of law. Normally, tax declaration is carried out by filling in data and other data related to determining obligations in tax declaration forms and appendices, then submitting the tax declaration to the tax authority.

Accurate, complete and timely declaration and submission of tax declarations is a basic criterion for assessing the level of tax compliance of taxpayers and is also a reliable basis for tax authorities to develop appropriate management strategies and measures for each group of taxpayers, ensuring their maximum voluntary compliance.

Thus, through tax declaration management activities, tax authorities grasp the compliance situation in tax declaration of taxpayers such as: the number of taxpayers who must submit tax declarations, the number of taxpayers who submit tax declarations late, the number of taxpayers who do not submit tax declarations, the number of taxpayers with errors, mistakes or fraud in tax declarations... From there, tax authorities have measures such as urging, reminding, requesting explanations, supplementing documents or making decisions on tax determination, inspection at taxpayers' headquarters, tax inspection... to limit the above non-compliance.

NNT inspection and audit

The main purpose of tax inspection and audit activities is to control, compare, and evaluate the accuracy and honesty in tax declaration activities and tax obligations of taxpayers; promptly detect and strictly handle fraudulent acts in tax compliance of taxpayers.

Tax audit is the activity of the tax authority in examining the actual situation of the audited subject, from which it compares with the functions, tasks, and requirements set for the audited subject to have comments and assessments on the tax compliance situation of the audited subject (Le Xuan Truong, 2016).

Tax inspection is an inspection activity of a specialized organization performing the inspection work of the tax authority with the inspected subject to detect, prevent and handle illegal acts (Le Xuan Truong, 2016).

The contents of the inspection and audit work for taxpayers include: (i) Checking and auditing tax registration; (ii) Checking and auditing compliance with accounting, books, documents, and invoices; (iii) Checking and auditing tax declaration, calculation, and payment.

In the context of implementing the self-declaration and self-payment mechanism, tax inspection and audit activities are a very basic content in performing the functions of tax administration agencies. Tax authorities no longer directly intervene in the tax declaration and payment process of taxpayers, except in cases where errors, violations or signs of non-compliance with tax laws are detected. Tax authorities are responsible for disseminating, supporting and guiding taxpayers to clearly understand and voluntarily fulfill their tax obligations, while closely monitoring taxpayers' compliance with their tax obligations and, through inspection and audit activities, promptly detecting and handling taxpayers' non-compliance with tax laws.

Through tax inspection and audit activities (inspection and audit of tax registration, tax declaration, tax payment, compliance with accounting regime, invoices and documents, etc.), non-compliance with tax regulations by taxpayers will be detected and handled promptly. The forms of handling corresponding to the level of violation, strictly and fairly implemented, will be a great warning, prevention and deterrent tool to prevent taxpayers from re-offending. Therefore, tax inspection and audit activities conducted effectively and using appropriate penalties will contribute significantly to improving taxpayers' transparency.

Tax debt management and tax debt enforcement

Tax payment is the act of a taxpayer transferring the amount of tax payable into the State account in the State Treasury. To ensure that taxpayers pay the State budget in full and on time, the tax authority must manage tax debts and enforce tax debts.

Tax debt management is the work of monitoring and grasping the status of tax debts and other revenues managed by tax authorities and implementing measures to urge the collection of tax debts of taxpayers. Through tax debt management activities, tax authorities accurately grasp the situation of taxpayers' performance of obligations, determine the amount of tax paid to the State budget, the amount of tax

outstanding debts of each taxpayer; thereby, taking measures to encourage taxpayers to pay taxes fully and promptly to the State budget; ensuring strict compliance with tax laws. Through that, the management of taxes paid and tax debts of taxpayers has contributed to raising taxpayers' awareness of tax compliance.

Tax debt enforcement

Tax debt enforcement is the application of measures by tax authorities and law enforcement agencies to force taxpayers to fulfill their tax obligations.

Tax debt enforcement includes the following contents: (i) Notifying taxpayers of their responsibility to fulfill tax obligations and the consequences they may suffer if they do not fulfill their tax obligations; (ii) Using coercive measures such as stopping the sale of invoices, suspending business operations, etc. to force taxpayers to fulfill their tax obligations. Tax debt enforcement can be considered the final step in the tax management process.

Tax enforcement represents the compulsory compliance nature of tax by the state power. With such a nature, tax enforcement has a great impact on taxpayers' tax compliance. This activity not only directly impacts and compels taxpayers who have opposing behavior to strictly comply, but also impacts the compliance consciousness of all taxpayers with tax laws.

2.4.3. Professional qualifications and ethics of tax officials

The professional qualifications and professional ethics of tax management officers and civil servants will contribute to ensuring the strictness of the law. The professional qualifications and professional ethics of tax officials on tax compliance of taxpayers are shown in that if the professional qualifications of tax officials are high and professional ethics are good, there will be the following positive impacts: (i) Quickly and conveniently resolving tax procedures for taxpayers, thereby creating satisfaction for taxpayers, making taxpayers willing to comply with taxes;

(ii) Do not cause trouble or harassment, thus not preventing taxpayers from complying with taxes; (iii) Do not collude to help taxpayers commit tax fraud.

2.4.4. Material and technical facilities of tax authorities

Technical facilities are factors that are material prerequisites for tax declaration and payment activities of taxpayers and tax management activities of tax authorities.

The more advanced and modern the tax industry's facilities and techniques are, the faster tax officials will perform their professional operations to better serve taxpayers, thereby reducing the time spent on tax procedures, reducing compliance costs, making taxpayers more satisfied with the assistance of tax authorities, and helping taxpayers comply with taxes better.

2.4.5. Group of factors belonging to the taxpayer 13

The approach from the perspective of taxpayers' social psychology and the overall research results have shown that (i) social psychological factors (tax spirit, subjective norms, perception of fairness, perception of tax authority's power, tax awareness, trust in tax authority); (ii) institutional factors (tax complexity, tax information); (iii) economic factors (penalties, possibility of tax audit, inspection); (iv) demographic factors (age, gender, education); (v) other factors (income, number of years in business) all have certain influences on tax compliance behavior.

2.4.6. Development of the tax agent system

Tax agents are organizations established under the provisions of law to perform tax services for remuneration such as: performing tax procedures on behalf of taxpayers (preparing tax declaration dossiers and performing tax declaration procedures, paying taxes, explaining to tax authorities for taxpayers, etc.), providing tax consultancy (advising on choosing the most beneficial investment projects in terms of tax, consulting on tax law). In terms of impact on tax compliance, the development of the tax agent system helps taxpayers who are not familiar with tax law to still comply with tax law because the preparation of tax declaration dossiers and implementation of tax procedures are performed by a professional tax service organization. Thus, the more the tax agent system develops, the more it contributes positively to improving taxpayer compliance. However, this impact will only be truly promoted under the condition that tax agents are strictly managed to ensure that acts of consulting for taxpayers to violate the law are effectively controlled and prevented.

2.4.7. Characteristics of the socio-economic environment

This group of factors includes factors such as economic growth rate, interest rates, inflation, political and diplomatic situations, etc. These are macro factors that affect the compliance of all tax groups. Practice shows that as the economy develops, the living standards of the people increase, and the level of tax compliance tends to increase.

Social factors also have an impact on tax compliance. This group includes: Social norms, social influence and responsibility of each subject in a social community; public opinion, reputation, position and role of each subject in a social community.

13 The influence of these factors will be presented in more detail in section 2.5.2.

2.5. Research model

2.5.2. Basis for model construction

Based on the research objectives, research questions, theoretical basis of tax compliance and research overview results, research gaps, the bases for building the research model of the thesis include:

Firstly , the SSF model on tax compliance is a model that has been applied by many studies on tax compliance behavior from 2010 to present. In the SSF model, tax compliance behavior is classified into voluntary tax compliance behavior and compulsory tax compliance behavior. This is also the approach of the thesis on tax compliance behavior of taxpayers.

Second, the theory of planned behavior (TPB) is a theory applied by many studies on taxpayers' tax compliance behavior. TPB indicates that an individual's intention about a behavior will affect the behavior performed. Behavioral intention is influenced by three factors: Attitude towards the behavior, subjective norms and perceived behavioral control. While taxpayers' perceptions of the fairness of the tax system, the power of tax authorities, tax awareness... are the convergence of cognitive processes, motivation and emotions related to tax compliance behavior. Therefore, the factor of perceived behavioral control is often not directly applied to the research model on factors affecting tax compliance behavior but is replaced by factors such as taxpayers' perceptions of the fairness of the tax system, the power of tax authorities, and tax awareness. Therefore, the thesis uses TPB theory with two components: attitude (tax spirit), subjective norms and extends cognitive factors (perceptions) about fairness, power of tax authorities, trust in tax authorities, tax awareness, awareness of the possibility of being audited, inspected, awareness of penalties, awareness of tax complexity to taxpayers' information processing behavior (called TPB theory extended with some factors).

Third , the overall research results indicate that no research has been conducted on tax compliance behavior among individual business households (working and doing business in craft villages).

 Fourth, the results of previous studies have not been in complete agreement on the influence (positive or negative; direct or indirect; or there is no basis to confirm the relationship) of factors (tax spirit, subjective norms, perception of the fairness of the tax system, trust in tax authorities, power of tax authorities, tax awareness, tax complexity, tax information, penalties, possibility of being audited, tax audited, age, gender, education level, income, number of years of business operation) on taxpayers' tax compliance behavior. Therefore, it is necessary to continue studying the influence of these factors.

The Slippery Slope Framework of Tax Compliance - Ssf

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