Impact of Tax Knowledge and Tax System Complexity on Compliance Behavior of Salaried Taxpayers: The Mediating Role of Fairness Perception

Abstract

 Taxation revenue contributes to the developmental finance of any state around the world. Recently International Center for Tax and Development (ICTD) estimated that taxation revenue is the 80% of total revenue in half of the countries in the world. Historically, tax collection from citizens has become critical policy issues. This research is conducted to find out the effect of tax system complexity and tax knowledge on taxation compliance among individual taxpayers, through individual’s fairness perception about taxation. Population of the study comprises of salaried individuals (government employees) of Pakistan. 300 questionnaires were distributed, while 270 has been received with valid responses. Moreover, snowball sampling method is used. This empirical evidence has concluded that tax knowledge significantly improves the compliance behavior through building fairness perception about taxation. Another finding of this research is that Tax system complexity is not influencing individuals’ attitude towards compliance. This study will help tax authorities and states to formulate their tax policies and tax administration accordingly, to improve taxation compliance and flourish tax culture through improved fairness perception about taxation.