Determinants of Behavior of Payers of Personal Income Tax: An Empirical Study from Indian Context

Abstract

Tax can be imagined as a contribution by citizens to the elected government to carry out its functioning smoothly. Tax compliance is a problem that has existed for as long as taxes. Paying taxes is always a difficult process because it has a direct impact on the taxpayer’s residual income. As a result, everyone tries to avoid tax by tax management and tax evasion which is against the law. Tax evasion is among the main issues that the developing nations have been facing. Broader empirical research regarding individual income tax compliance behavior is scant in India. The present study aimed at exploring the determinants of taxpayer’s behavior in meeting personal tax obligation and examining the interrelationship between the factors and their contribution towards tax compliance from Indian context. The study is based on primary data collected through structure questionnaire from 1068 sample respondents covering nine districts of Odisha, a State of India by following stratified random sampling method. The exploratory factor analysis (EFA) and confirmatory factor analysis (CFA) identify three major factors i.e., economic, institutional, and social factors of tax compliance. Structural equation model has been adopted to achieve our objectives. It is evident from the results that variables under economic and institutional factors have a significant carry compared to variables under social factors. This also indicates about concern of individuals regarding their disposable income. Therefore, government should think of lowering tax rates and simultaneously keep on simplifying the tax compliance procedures and strengthen and expedite tax audit system.