Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


The Effect of Tax Fairness on Sales Tax Compliance among Jordanian Manufacturing SMEs

Author(s): Ahmad Farhan Alshira'h, Hijattulah Abdul-Jabbar

Tax compliance leads to reducing the fiscal deficit and public debt, thereby it provides funding to satisfy the economic and social development. Despite the extensive government’s efforts, the compliance of sales tax (typically known as value added tax globally) among the small and medium-sized enterprises (SMEs) in Jordan is relatively low, thus, it negatively impacts the government revenues. Previous studies regarding the effect of tax fairness on sales tax compliance among SMEs has been neglected. Therefore, the study aims to examine the effect of tax fairness on sales tax compliance among Jordanian manufacturing SMEs. This study uses a survey method with questionnaires distributed to 660 owners-managers of SMEs in manufacturing sector. In the further data tabulation, only 215 questionnaires were declared eligible to be tested at further stage. The study hypothesis was then tested using PLS software by applying structural equation models (SEMs). The results showed that tax fairness had a significant influence on sales tax compliance. This paper calls for future studies in the area of sales tax compliance of SMEs in order to better understand its determinants. Besides, it also provides valuable information as well as guidance policymakers and SMEs owner-managers to improve sales tax compliance in the future.

Get the App