Tax compliance is the willingness of an individual to follow the tax rules and thus pay the taxes he is legally bound to pay.
For every government that is aiming for tax revenue mobilisation, a law (tax) abiding public is always an asset. The loyal approach of the taxpayers – be it the individuals and the corporate, to follow tax laws properly, indicates tax compliance. Here, a tax compliant society makes the work of tax administration easy as there is voluntary and spontaneous payment of taxes without coercion or deep checking. The stress of the tax administrators also will be minimum when the society is tax compliant.
What is tax compliance?
According to James and Alley, tax compliance is “the willingness of individuals and other taxable entities to act in accordance with the spirit as well as the letter of tax law and administration without the application of enforcement activity” (James and Alley 1999: 32).
A tax compliant society doesn’t engage in tax evasion or avoidance. Still some experts feel that tax avoidance is also part of tax compliance.
There are several factors that makes a society tax compliant. Sometimes, a society’s commitment, customs, socio-economic behaviour etc. may make it more tax compliant. Similarly, measures like low or moderate tax rates, easy tax procedures, friendly administration etc. may also raise tax compliance.