The association between self-assessed tax knowledge and tax compliance

Abstract

Background: Although many different tax collection systems are used in countries around the world, the one most commonly used one is the self-assessment system of taxation. Where this system is applied, taxpayers themselves are responsible for computing their tax returns. Taxpayers are therefore required to have sufficient tax knowledge to ensure that they can comply with their tax obligations. This study examines the association between self-assessed tax knowledge and tax compliance. Main purpose of the study: To assess whether there is an association between self-assessed tax knowledge and tax compliance, and whether the association is affected by factors such as gender, population group and educational level. Method: A quantitative research method was used to analyse secondary data. Inferential statistical methods such as linear regression analysis and moderation analysis were employed in order to address the research objectives. Results: The results of the linear regression analyses showed that there is a statistically significant association between self-assessed tax knowledge and tax compliance. Gender and population group were not found to be moderators in the association between self-assessed tax knowledge and tax-compliance behaviour. Level of education, particularly higher education, was a statistically significant moderator, while a lower level of education was not a statistically significant moderator. Conclusions: The findings of this study expand the knowledge of the association between tax knowledge and tax compliance. Furthermore, since this study focused on self-assessed tax knowledge, it provides insight on whether the positive association between tax knowledge and tax compliance still holds in instances of self-assessed tax knowledge. This study also confirms that taxpayers’ educational level is a moderating factor in the association between (self-assessed) tax knowledge and tax compliance.