DETERMINANTS OF TAX COMPLIANCE AMONG THE OWNERS OF SMALL AND MEDIUM-SIZED ENTERPRISES IN THE KEGALLE DISTRICT

Abstract

Tax is an important means of revenue for the government. Therefore, all efforts must be made by the governments to accurately and efficiently collect relevant taxes for continuing the government’s operations. But in reality, many obstacles have been encountered in the application of taxes. Department of Inland Revenue still struggles to keep efficient and effective tax administration. Small and Medium-sized Enterprises (SMEs) are considered significant for economic growth and for generating taxable income for a country. However, SMEs have less compliance when compared to large business entities. This study aims to identify the determinants of tax compliance among the owners of small and medium-sized enterprises in the Kegalle District. A questionnaire was designed using the Five Point Likert Scale and distributed among the owners of SMEs in the Kegalle district which was the unit of analysis of the survey. Data was collected from a sample of two hundred Obtained data analyzed with statistical techniques of correlation, regression and descriptive statistics using IBM SPSS 25. There is a huge gap in the literature on tax compliance related to SMEs in Sri Lanka with Tax Knowledge, Tax Morale, Tax Rate and Tax Penalties. Thus, it is recommended for further surveys with more similar factors to increase the reliability of the study. By emphasizing these underlying factors, tax authorities will able to make necessary changes to the tax administrative system in Sri Lanka that greatly increase the compliance level of SMEs resulting being increasing the government revenues, allowing authorities to provide quality service to taxpayers and finally the government as a whole will able to provide more improved utilities to the citizens of the country