The influence of tax transparency on sales tax evasion among Jordanian SMEs: The moderating role of moral obligation

Abstract

Globally, taxes is a crucial source of income for various governments. However, in spite of the numerous importance of taxes for the socioeconomic growth of developed and developing countries, Jordan as a developing country faces challenges of tax evasion. It is pivotal in this regard to reduce tax evasion among Small and Medium Sized Enterprises (SMEs). This study aimed to examine the relation between tax transparency and sales tax evasion among Jordanian SMEs considering the role of moral obligation as the moderating factor between the endogenous and exogenous variables. Using a quantitative approach, this study surveyed 400 SMEs owners/managers. Only 45% of these surveys were valid for further analysis. For hypothesis testing and data analysis, the partial least squares structural equational modelling (PLS-SEM) technique was used. The results revealed that tax transparency had negative and significant influence on sales tax evasion. This study also provides evidence that the model’s ability to explain tax evasion and the influence of tax transparency on sales tax evasion are both greatly strengthened by the integration of moderating role of moral obligation. This study contributes to the existing body of knowledge on this subject and can help scholars and practitioners investigate the effects of tax transparency and moral obligation on sales tax evasion among SMEs. Hence, tax authorities, and policymakers should incorporate these factors to formulate effective strategies to combat tax evasion in Jordan, which could lead to an overall improvement in the country’s revenue collection.