Determinants of tax non-compliance behaviour of Yemeni SMEs : a moderating role of Islamic religious perspective

Tax non-compliance behaviour has been addressed as a continuous serious concern globally. However, empirical research on tax non-compliance in Yemen is still scarce. The major purpose of this study was to investigate the issue of income tax non-compliance behaviour in Yemeni SMEs from two theoretical perspectives, namely social psychology and economy. It aimed to empirically investigate the influence of the Islamic religious perspective, geopolitical differences, tax service quality, public governance quality, tax rate and penalties on taxpayers’ behaviour. As a new contribution to tax non-compliance knowledge, the moderating effect of Islamic religious perspective on the relationship between tax non-compliance behaviour and its determinants was also examined. Data was collected using the survey method, whereby a total of 500 questionnaires yielded a 66% response rate. Hierarchical regression analysis was employed to test the hypotheses. The findings show that Islamic religious perspective and geopolitical differences have significant influences on taxpayers’ behaviour. The results also indicate that tax service quality and public governance quality have significant negative influences on the level of tax non-compliance, and tax rate positively influences the level of tax non-compliance but the influence of penalties on the level of tax non-compliance is statistically non-significant. Additionally, this study provides evidence that integrating the Islamic religious perspective, as a moderator, strengthens the ability of the model to explain the issue of tax non-compliance, and significantly moderates the influence of geopolitical differences and penalties. This study concluded with the theoretical and methodological contributions, and practical implications for the tax authority and the government of Yemen.