An exploration of factors influencing tax avoidanceby SMEs in Jamaica
Keywords:
taxation policies, SME, public sector, sociopsychological, jamaica, tax, tax avoidanceAbstract
The research investigates the reasons for tax avoidance in Small and Medium Size Entities (SMEs) in Jamaica and aims to provide recommendations to reduce or prevent it. The issue was investigated using Qualitative Case Study Methodology (QCSM), with thematic analysis applied to relevant documents, interviews, and focus groups involving SME operators, public sector workers, and bankers. The study found that high tax rates and a lack of government support are the main reasons for tax avoidance among SMEs. The complex and overwhelming Jamaican tax system and ineffective application of the ability-to-pay theory also contribute to this behavior. Shareholders seeking to increase profits often encourage tax avoidance, but tax compliance should not be compromised.
The study offers insights on taxation in SMEs, suggesting ways for governments to improve compliance through progressive and equitable tax processes. Recommendations include the creation policies that create a user-friendly, adaptable, and accessible tax system, as well as incentivizing compliance through government management and distribution of taxpayers' money. It also supports traditional and socio-psychological theories of taxation and enhances their applicability to Jamaican SMEs and the Global South. Finally, the study emphasizes the role of government in shaping tax avoidance behavior, including perceptions of government, government performance, and taxation policies on SME compliance.
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