THE ROLE OF INCOME TAX SYSTEM STRUCTURE IN TAX NON-COMPLIANCE BEHAVIOUR AMONG SMEs IN YEMEN

Abstrak

Tax is the main source of government revenue. However, a number of countries worldwide are increasingly besieged by challenges regarding compliance levels with the rules of tax systems. Thus, this paper aims to enhance an understanding of tax non-compliance behaviour by investigating the effect of the income tax system structure on Yemeni taxpayers’ behaviour. The study focuses on income tax compliance behaviour of owner-managers of small and medium enterprises (SMEs), as the Yemeni economy relies heavily on this sector. The SME sector represents 99.6 percent of business in Yemen. Based on a quantitative approach using a self-administered survey instrument, a total of 330 valid questionnaires were collected and the feedback provided analyzed. The results demonstrate that SME taxpayers exhibited a high level of tax non-compliance. Furthermore, the multiple regression analysis shows that the tax rate had a positive and significant influence on tax non-compliance behaviour, but the tax penalties rate did not. These results can be especially relevant to policymakers and practitioners of tax systems structures, particularly in a developing country such as Yemen.