Tax evasion is one of the biggest challenges the current government in Somalia is facing in terms of increasing its revenue, it also hinders the ability of the government to provide basic services to its citizens. This study evaluates the determinants of tax evasion in Banadir Region of Somalia. A questionnaire was used to collect information on how drivers in the region pay their taxes, 240 randomly selected drivers have successfully responded to this study.
The outcome of the study demonstrates that tax system has a significant negative relationship with tax evasion. On the other hand, tax rate, corruption, income level, and also education level have a positive significant relationship with tax evasion. This study suggests that essential measures ought to be taken by the tax authorities to enhance income collection and decrease tax evasion. It is additionally recommended that crusade against corruption, public enlightenment on tax issues and correction of tax procedures should be embraced.
Table of Contents
1. Introduction
2. Literature review
1.1. Tax System (TS)
1.2. Tax Rate
1.3. Corruption
1.4. Education level
1.5. Income level
1.6. Gap in the literature and hypothesis of the study
3. Research Methodology
4. Result and Discussion
5. Conclusion, Limitation and Future Research
Research Objective and Focus
The primary objective of this study is to investigate the determinants of tax evasion in the Banadir region of Somalia, specifically examining how factors such as tax systems, tax rates, corruption, income levels, and education levels influence taxpayer behavior and compliance.
- Analysis of tax system efficiency and its correlation with evasion.
- Evaluation of the impact of tax rates on taxpayer resistance.
- Examination of corruption levels within tax authorities and its effect on compliance.
- Assessment of how socioeconomic factors like education and income influence tax avoidance.
- Establishment of a foundational empirical study for the Somali taxation context.
Excerpt from the Book
1.2. Tax Rate
Tax rate (TR) is the amount of tax a citizen will pay as per the taxable items and guideline of tax assessment. For both developed and developing nations, a significant number of studies have been done on the relationship between tax rates and tax evasion. Their outcomes demonstrate that a positive relationship exists (Bashar et al., 2008; Lutfi, 2009; Aloys, 2010; Jayeole,2010; James and Moses, 2012; Mughal and Akram, 2012; Tijani and Mathias, 2013; Guldana, 2013; Richard, 2013; Maria and Judith, 2013; Friedrich et al., 2013). These investigations presumed that Tax rate corresponds with the capacity of the citizens in behaving positively or negatively towards the perception of tax evasion. Taxpayers are utilizing high tax rate as the chance for evading taxes and underreporting their income and revenue to the tax authorities. James and Moses (2012) in their study on the effect of tax management on government revenue in an emerging economy, concluded that a positive relationship exists amongst tax rate and tax evasion. Maria and Judith (2013) found in their study that higher tax rate debilitates a tax compliance. Mughal and Akram (2012) and Jayeole (2010) studied tax evasion and tax avoidance in Lagos state in Nigeria and their outcomes are in accordance with past studies which demonstrates that there is a positive relationship between tax rate and tax evasion. The study inferred that high tax rate draws in resistance and energizes tax evasion. However, opposing to the above outcomes, Nhano et al. (2013), Fasina and Olowokere (2013) and Adebisi et al. (2013) found that there is a negative relationship amongst tax rate and tax evasion. On the other hand, Peter and Efiafoh (2013) in their investigation on self-employed Nigerian concerning tax evasion presumed that neither negative nor positive relationship exists between tax evasion and tax rate.
Summary of Chapters
1. Introduction: This chapter contextualizes the importance of tax revenue for governmental functions and highlights the specific challenges of tax evasion within the Somali economy.
2. Literature review: This section examines theoretical frameworks and previous empirical studies regarding the determinants of tax evasion, identifying gaps that this research addresses.
3. Research Methodology: This chapter details the survey-based research design, the selection of the sample population, and the statistical tools used to analyze the collected data.
4. Result and Discussion: This section presents the reliability and multicollinearity tests, followed by the regression analysis results confirming the relationship between identified variables and tax evasion.
5. Conclusion, Limitation and Future Research: This chapter summarizes the study's findings, acknowledges limitations regarding sample scope, and provides recommendations for future research in the Somali context.
Keywords
Tax Evasion, Tax System, Income level, Education level, Tax rate, Corruption, Banadir State, Somalia, Tax compliance, Revenue collection, Socioeconomic factors, Fiscal policy, Tax authority, Public service, Tax avoidance.
Frequently Asked Questions
What is the core focus of this research study?
The study primarily focuses on identifying and analyzing the determinants of tax evasion specifically within the Banadir region of Somalia.
Which key variables are examined as determinants of tax evasion?
The research examines five key variables: tax rate, tax system, corruption levels, income levels, and education levels of taxpayers.
What is the primary objective of this study?
The objective is to examine the relationships between the selected independent variables and the dependent variable of tax evasion to help authorities improve revenue collection.
What scientific methodology was utilized for this research?
The researcher adopted a survey study design using random sampling, distributing a structured five-point Likert-scale questionnaire to automobile taxpayers.
What does the main body of the work cover?
The main body covers a comprehensive literature review, the hypothesis development, the research methodology employed, and a detailed discussion of the regression results obtained from the data.
Which keywords best characterize the work?
The work is best characterized by terms such as tax evasion, tax compliance, tax system, corruption, and the socioeconomic variables prevalent in the Somali economic landscape.
Why was the Banadir region specifically selected for this study?
The Banadir region was chosen because it is highly populated, has significant growth potential, and faces challenges with less developed sources of revenue generation, making it a critical area for study.
What were the main findings regarding the relationship between the tax system and tax evasion?
The study found a significant negative relationship, suggesting that an effective and efficient tax system leads to higher taxpayer compliance in the Banadir region.
What were the limitations mentioned by the author regarding the research scope?
The author noted that the study only considered automobile taxpayers in one out of eighteen regions in Somalia, which limits the generalizability of the findings.
How does this study contribute to existing literature on Somalia?
It provides a new foundation for taxation research in Somalia, as there were previously no studies conducted on the determinants of tax evasion in this specific context.
- Citar trabajo
- Zakarie Ahmednour Ali (Autor), 2018, Tax evasion determinants in Somalia, Múnich, GRIN Verlag, https://www.grin.com/document/416799
