Factors Affecting Timely Remittance of Tax Returns in Lusaka, Zambia: A Case of Chachacha and Freedom Way Block

Lubinda Haabazoka; Nancy Mulenga Chiti

doi:10.59413/eafj/v3.i1.4

Authors

Lubinda Haabazoka University of Zambia Author https://orcid.org/0000-0003-4055-2531
Nancy Chiti Mulenga Author

DOI:

https://doi.org/10.59413/eafj/v3.i1.4

Keywords:

Tax Compliance, Returns Remittance, Tax Administration, Political Legitimacy Theory, Probit Regression

Abstract

The objective of this study was to explore the factors behind the timely remittance of tax returns by businesses in Lusaka. The purpose was to conduct a mixed-methods case study of the factors affecting timely remittance of tax returns amongst small businesses in Lusaka’s Chachacha-Freedom Way Tax Block. Data was collected from a purposive sample of 159 small business owners and managers in the Chachacha and Freedom Way Blocks in Lusaka, Zambia. A self-administered questionnaire was the tool used for data collection. Categorical data was analyzed by simple frequencies using SPSS Version 26. Qualitative textual data was analyzed manually using hierarchical coding frames. Quantitative Likert scale data was used to estimate PROBIT empirical models to investigate how factors such as perceptions of administrative simplicity, economic efficiency, equity, flexibility, certainty, and political responsibility around the fiscus affect the probability of timely remittance of returns. Results show that experiential issues were some of the reasons affecting taxpayers that could be analyzed in terms of the conduct of their businesses, interaction with tax authorities, and information flows between them. Factors contributing to delayed remittance of tax returns included non-adoption of e-filing methods and perceptions of political responsibility or being otherwise behind the tax system and fiscus. The study therefore finds some evidence for the political legitimacy theory of tax compliance. Both the quantitative and qualitative analyses conducted generally supported the idea that perceptions of economic efficiency, administrative simplicity, equity, flexibility, certainty, and political responsibility generally contribute to the timely remittance of tax returns. Recommendations of the study include promotion and easing of user friendliness of e-filing methods, as well as raising the ethical profile of the authority and strengthening taxpayer belief in the value of paying taxes through strategic partnerships with tax-funded government operations to improve political legitimacy.

References

Adam, S. & O'Connell, S., 1998. Aid, Taxation, and Development: Analytical Perspectives on Aid Effectiveness in Sub-Saharan Africa. Volume 1885 ed. s.l.:World Bank Publications. DOI: https://doi.org/10.1596/1813-9450-1885

Alm, J., 1991. A perspective on the experimental analysis of taxpayer reporting. The Accounting Review, 66(3), pp. 577-593.

Alshira’h, A. F., 2019. The effect of peer influence on sales tax compliance among Jordanian SMEs. International Journal of Academic Research in Business and Social Sciences, 9(3), pp. 710-721. DOI: https://doi.org/10.6007/IJARBSS/v9-i3/5737

Alshira'h, A. F. & Abdul-Jabbar, H., 2020. Moderating role of patriotism on sales tax compliance among Jordanian SMEs. International Journal of Islamic and Middle Eastern Finance and Management., 13(3), pp. 389-415. DOI: https://doi.org/10.1108/IMEFM-04-2019-0139

Arogundade, J. A., 2005. Nigerian income tax and its international dimension. Ibadan: Spectrum Books Ltd.

Bird, R. M. & de Jantscher, M. C. eds., 1992. Improving tax administration in developing countries (Vol. 19). Washington DC: International Monetary Fund.

Bloomquist, K. M., 2003. Income inequality quality and tax evasion: A synethesis. Tax Notes International, 31(4), pp. 347-367.

Bodea, C. & LeBas, A., 2014. The Origins of Voluntary Compliance: Attitudes Toward Taxation in Urban Nigeria. British Journal of Political Science, 46(1), pp. 1-24. DOI: https://doi.org/10.1017/S000712341400026X

Brooks, C., 2002. Introductory Econometrics for Finance. s.l.:Cambridge University Press.

Brown, K., 2017. Taxation and Development - A Comparative Study. s.l.:Springer. DOI: https://doi.org/10.1007/978-3-319-42157-5

Bryman, A., 2012. Social Research Methods. 4th ed. Osford: Oxford University Press.

Burns, R., 2000. Introduction to Research Methods, New York: Sage Productions.

Carnahan, M., 2015. Taxation Challenges in Developing Countries. Asia & Pacific Policy Studies, 2(1), pp. 169-182. DOI: https://doi.org/10.1002/app5.70

Carroll, J., 1989. A cognitive-process analysis of taxpayer compliance. Nevada, National Academy Sceinces.. DOI: https://doi.org/10.9783/9781512806281-009

Çevik, S., 2017. Tax Morale and Tax Compliance in Socio-Political Context. In: M. Aydın & S. Tan, eds. Political Economy of Taxation. London, UK: IJOPEC, pp. 37-57.

Chatama, Y., 2013. The impact of ICT on Taxation: the case of Large Taxpayer Department of Tanzania Revenue Authority. Developing Country Studies, 3(2), pp. 91-100.

Collins, H., 2010. Creative Research: The Theory and Practice of Research for the Creative Industries. s.l.:AVA Publishing.

Cresswell, J., 2014. A Concise Introduction to Mixed Methods Research. s.l.:SAGE Publications, Inc .

Devos, K., 2010. A study of demographic factors and enforcement measures influencing Australian personal taxpayers' compliance behaviour. Journal of Management and World Business Research, 7(1), pp. 27-42.

Embaye, A., 2007. "Essays on Tax Evasion and Government Spending in Developing Countries." (Dissertation), s.l.: Georgia State University.

Feld, L. P. & Frey, B. S., 2007. Tax compliance as the result of a psychological tax contract: The role of incentives and responsive regulation. Law & Policy, 29(1), pp. 102-120.. DOI: https://doi.org/10.1111/j.1467-9930.2007.00248.x

Freire-Serén, M. J. & i Martí, J. P., 2013. Tax avoidance, human capital accumulation and economic growth. Economic Modelling, Volume 30, pp. 22-29.. DOI: https://doi.org/10.1016/j.econmod.2012.08.021

Fuest, C. & Zodrow, G. R. eds., 2013. Critical issues in taxation and development. s.l.:MIT Press..

Gorodnichenko, Y., Martinez-Vazquez, J. & Peter, K., 2009. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia,". Journal of Political Economy, 117(3), pp. 504-554. DOI: https://doi.org/10.1086/599760

Güzel, S. A., Özer, G. & Özcan, M., 2019. The effect of the variables of tax justice perception and trust in government on tax compliance: The case of Turkey. Journal of Behavioral and Experimental Economics, , Volume 78, pp. 80-86.. DOI: https://doi.org/10.1016/j.socec.2018.12.006

Henderson, I., 1974. “The Limits of Colonial Power: Race and Labour Problems in Colonial Zambia 1900 -1953”. Journal of Imperial and Commonwealth History, 2(3), pp. 294-307. DOI: https://doi.org/10.1080/03086537408582413

James, S. & Alley, C., 2004. Tax compliance, self-assessment and tax administration. Journal of Financial and Management in Public Services, Volume 2, pp. 27-42.

Kasipillai, J. & Abdul-Jabbar, H., 2006. Gender and ethnicity differences in tax compliance. Asian Academy of Management Journal, 11(2), pp. 73-88.

Kirchler, E., 2007. The economic psychology of tax behaviour. s.l.:Cambridge University Press.. DOI: https://doi.org/10.1017/CBO9780511628238

Kirchler, E., Hoelzl, E. & Wahl, I., 2008. Enforced versus voluntary tax compliance: The “slippery slope” framework. Journal of Economic Psychology, 29(2), pp. 210-225.. DOI: https://doi.org/10.1016/j.joep.2007.05.004

Lederman, L., 2018. Does enforcement reduce voluntary tax compliance? BYU L. Rev., p. 623.

Lozza, E., Kastlunger, B., Tagliabue, S. & Kirchler, E., 2013. The relationship between political ideology and attitudes toward tax compliance: The case of Italian taxpayers. Journal of Social and Political Psychology, 1(1), pp. 51-73. DOI: https://doi.org/10.5964/jspp.v1i1.108

Majumdar, R., 2007. Marketing Research - Text, Applications and Case Studies. s.l.:New Age International.

Mathieu, J. E. & Zajac, D. M., 1990. A review and meta-analysis of the antecedents, correlates and consequences of organization commitment. Psychology Bulletin, Volume 109, pp. 171-194. DOI: https://doi.org/10.1037//0033-2909.108.2.171

McBarnett, D., 2003. When compliance is not the solution but the problem: from changes in law to changes in attitude. In: V. Braithwaite, ed. Taxing Democracy: Understanding Tax Avoidance and Evasion. . Aldershot: Ashgate.

McKerchar, M. & Evan, C., 2009. Sustaining growth in developing economies through improved taxpayer compliance: Challenges for policy makers and revenue authorities. eJournal of Tax Research, 7(2), pp. 171-201. DOI: https://doi.org/10.2139/ssrn.1415164

McKerchar, M. & Evans, C., 2009. McKerchar, M., & Sustaining growth in developing economies through improved taxpayer compliance: Challenges for policy makers and revenue authorities. eJTR, Volume 7, p. 171. DOI: https://doi.org/10.2139/ssrn.1415164

Moyo, D., 2009. Why foreign aid is hurting Africa. The Wall Street Journal, Volume 21, pp. 1-2.

Mulenga, M., 2003. Taxation in Zambia. Lusaka, Zambia: Multimedia Zambia.

Muleya, F. et al., 2018. Rental Taxation: Curbing Non-Compliance and Improving Administration, Lusaka, Zambia: ZIPAR & ZRA.

Mumba, E., 2017. Causes of failure of Entrepreneurship in Zambia. International Journal of Multi-Disciplinary Research, pp. 1-22.

Murphy, K., 2008. Enforcing tax compliance: to punish or persuade? Economic analysis and policy, , 38(1), pp. 113-135.. DOI: https://doi.org/10.1016/S0313-5926(08)50009-9

Musimenta, D. N. S. K., Muhwezi, M., Akankunda, B. & Nalukenge, I., 2017. Tax compliance of small and medium enterprises: a developing country perspective. Journal of Financial Regulation and Compliance., 25(2), pp. 149-175. DOI: https://doi.org/10.1108/JFRC-08-2016-0065

Mwendapole, M., 1977. A History of the Trade Union Movement in Zambia Up to 1968. Lusaka, Zambia: University of Zambia, Institute for African Studies.

Myers, M., 2008. Qualitative Research in Business & Management. s.l.:SAGE.

Nhekairo, W., 2014. The Taxation System in Zambia, Lusaka, Zambia: Jesuit Center for Theological Reflection.

Novikov, A. & Novikov, D., 2013. Research Methodology: From Philosophy of Science to Research Design. s.l.:CRC Press. DOI: https://doi.org/10.1201/b14562

Olsen, W., 2004. Triangulation in Social Research: Quantitative and Qualitative Methods Can Really be Mixed. In: M. Omskirk, ed. Developments in Sociology. s.l.:Causeway Press, pp. 1-30.

Palil, M. R., 2010. Tax knowledge and tax compliance determinants in self-assessment system in Malaysia (Doctoral dissertation,)., s.l.: University of Birmingham.

Panda, A. & Gupta, R., 2014. Making academic research more relevant: A few suggestions. IIMB Management Review, pp. 146-148. DOI: https://doi.org/10.1016/j.iimb.2014.07.004

Persson, A., 2008. The institutional sources of statehood. Assimilation, multiculturalism, and taxation in Sub-Saharan Africa., Göteborg, Sweden: Department of Plitical Science, University of Gothenburg.

Picur, R. D. & Riahi‐Belkaoui, A., 2006. The impact of bureaucracy, corruption and tax compliance. Review of Accounting and Finance., 5(2), pp. 174-180. DOI: https://doi.org/10.1108/14757700610668985

Rakner, L., 2003. Political and Economic Liberalisation in Zambia 1991-2001. s.l.:Nordic Africa Institute.

Rawlings, G. & Braithwaite, V., 2003. Voice for change: Australian perspectives on tax administration. Australian Journal of Social Issues, , 38(3), pp. 263-269.. DOI: https://doi.org/10.1002/j.1839-4655.2003.tb01146.x

Regnault, A., Willgoss, T. & Barbic, S., 2018. Towards the use of mixed methods inquiry as best practice in health outcomes research. Journal of Patient Reported Outcomes, 2(1), p. 19. DOI: https://doi.org/10.1186/s41687-018-0043-8

Richardson, G., 2008. The relationship between culture and tax evasion across countries: Additional evidence and extensions. Journal of International Accounting, Auditing and Taxation, 17(2), pp. 67-78.. DOI: https://doi.org/10.1016/j.intaccaudtax.2008.07.002

Roth, J. A., Scholz, J. T. & Witte, A. D., 1989. Taxpayer Compliance: An Agenda for Research (Vol. 1). s.l.:University of Pennsylvania Press.. DOI: https://doi.org/10.9783/9781512806274

Sadress, N., Bananuka, J., Orobia, I. & Opiso, J., 2019. Antecedents of tax compliance of small business enterprises: a developing country perspective. International Journal of Law and Management., 25(1), pp. 64-75. DOI: https://doi.org/10.1108/IJLMA-10-2017-0234

Sandmo, A., 2005. Theory of Tax Evasion: A Retrospective View. National Tax Journal, 58(4), pp. 643-663. DOI: https://doi.org/10.17310/ntj.2005.4.02

Sardanis, A., 2014. Zambia: The first 50 Years. s.l.:Bloomsbury Academic. DOI: https://doi.org/10.5040/9780755623518

Scholz, J. T. & Pinney, N., 1995. Duty, fear, and tax compliance: The heuristic basis of citizenship behavior. American Journal of Political Science, , pp. 490-512.. DOI: https://doi.org/10.2307/2111622

SikamoI, J., MwanzaI, A. & Mweemba, C., 2016. Copper mining in Zambia - history and future. Journal of the Southern African Institute of Mining and Metallurgy, pp. 491-496. DOI: https://doi.org/10.17159/2411-9717/2016/v116n6a1

Small, O. & Brown, L., 2020. Taxpayer Service Provision and Tax Compliance: Evidence for Large Taxpayers in Jamaica. Public Finance Review., 48(2), pp. 250-277. DOI: https://doi.org/10.1177/1091142119881532

Tanzi, V. & Shome, P., 1993. A primer on tax evasion. Staff Papers, 40(4), pp. 807-828. DOI: https://doi.org/10.2307/3867611

Taylor, J., 2003. Corporation income tax brackets and rates, 1909-2002. Statistics of Income. SOI Bulletin, 23(2), pp. 284-291.

Torgler, B., 2003. Tax morale: Theory and analysis of tax compliance., s.l.: Unpublished Doctoral Thesis.

Torgler, B. & Schneider, F., 2007. What shapes attitudes toward paying taxes? Evidence from multicultural European countries. Social Science Quarterly, 88(2), pp. 443-470. DOI: https://doi.org/10.1111/j.1540-6237.2007.00466.x

Viswanathan, M., 2017. Tax compliance in a decentralizing economy. Ga. St. UL Rev., Volume 34, p. 283. DOI: https://doi.org/10.2139/ssrn.3002213

Xu, J., 2005. Market Research Handbook: Measurement, Approach and Practice. s.l.:iUniverse.

Yin, R., 2012. Applications of Case Study Research. s.l.:SAGE.