Abstract:
1. Introduction
Tax evasion remains a significant challenge in Sri Lanka, and
understanding the factors influencing tax evasion is crucial for developing
strategies to improve tax compliance and enhance the efficiency of the tax
system. This study, guided by the Theory of Planned Behavior, investigates
the factors influencing tax evasion intentions among SMEs in the Gampaha
district of Sri Lanka.
2. Research Methodology
A quantitative research approach was employed, utilizing a structured
questionnaire distributed to 99 SME owners in the Gampaha district
selected using a convenience sampling method. Data were analyzed using
SPSS and multiple regression analysis was applied to test the hypotheses
regarding the relationships between Tax Morale, Tax Knowledge, Tax
System Fairness, Tax Complexity, Tax Corruption, Tax Power of the
Authority, and tax evasion intentions.
3. Findings and Discussion
The correlation analysis shows significant relationships between identified
independent factors and Tax Evasion Intentions by SMEs. The multiple
regression analysis revealed that the model accounted for a remarkable
99.2% of the variance in TEI (R² = 0.992). Tax Morale Tax Knowledge and
Tax Fineness proved to have a significant negative relationship with
evasion intention. On the other hand, Tax Complexity, Tax Corruption, and
Tax Power of the Authority showed a significant positive influence on
evasion intentions.
4. Conclusion and Implications
This study concludes that enhancing tax compliance among SMEs requires
addressing public perceptions of the tax system, simplifying tax processes,
and promoting tax knowledge. The findings provide theoretical and
practical implications for tax policymakers, emphasizing the need for tax
reforms that foster a culture of compliance.
