Determinants of Tax Compliance Behaviour: The Case of Sri Lankan Taxpayers

Sampath Kehelwalatenna and Brayan Soyza

This study examines the determinants of individual taxpayers’ tax compliance behavior in Sri Lanka under new tax laws enforced in 2018 using data collected through a structured questionnaire from a sample of 384 individual taxpayers in Sri Lanka. Findings derived through a regression analysis reveal a significant portion of individual taxpayers’ tax compliance behavior in Sri Lanka is explained by variables such as tax rate, fines and penalties and fairness and transparency of the tax system. It also found tax awareness and knowledge moderates the impact of the above variables on individual taxpayers’ tax compliance behavior. The findings imply that Sri Lankan government could raise tax rates and fines, and penalties to enhance individual taxpayers’ tax compliance behaviour. Strengthening tax awareness programmes would also increase the positive impact of tax rates and fines, and penalties on individual taxpayers’ tax compliance behaviour. This is the first study to examine determinants of individual taxpayers’ tax compliance behavior in Sri Lanka under the latest tax laws. The study also enhanced robustness of estimates of the impact of the determinants of individual tax payers’ tax compliance behavior on their compliance level in Sri Lanka by incorporating the moderating effect of tax awareness and knowledge.