Tax knowledge and tax compliance determinants in self assessment

and 5) and other factors (age, income, level, culture, education, gender). The division into
these categories is based on Kirchler (2007) and Loo (2006) in which they approached
tax compliance from an interdisciplinary perspective which represents a wider
perspective of tax compliance determinants compared to other researchers. For example,
Kirchler (2007: 3) divided tax compliance determinants into five categories and the study
was based on psychological and tax authority-taxpayers’ view namely, political
perspectives, social psychological perspectives, decision making perspectives, self
employment and interaction between tax authorities and taxpayers.
4.3.1 Economic factors
Economic factors in relation to tax compliance refer to actions which are associated with
the costs and benefits of performing the actions (Loo, 2006: 96). Hasseldine (1993), Song
and Yarbrough (1978) and Torgler and Schneider (2005) assumed that taxpayers are
rational economic evaders who likely would assess the costs and/or benefits (tax savings,
see Allingham and Sandmo (1972) of evasion. They would attempt to minimise their tax
liability, for example, by intentionally under reporting their income and would enjoy tax
savings if they were not detected by the tax authorities. On the other hand, they would be
willing to pay more, including a penalty, if they were caught (Song and Yarbrough, 1978;
Somasundram, 2005b; Torgler, 2007). In the following subsections, the tax compliance
determinants associated with economic factors i.e tax rates, tax audits and perceptions of
government spending are explored in more detail.
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