The Moderating Effects of Government Supports towards VAT Compliance Among SMES in UAE: A Conceptual Framework
Purpose – Value Added Tax has been implemented in the UAE for broadening the tax base and increase government revenue. However, the government of UAE is still struggling to ensure that the SMEs comply with the taxation. The purpose of this paper is to propose a conceptual framework to analyse the moderating effects of government supports on the compliance with Value Added Tax imposed on Small Medium Entreprises in the UAE.
Design/method/approach – The proposed conceptual framework is framed within the three theoretical positions of economic, psychological, and equity theories to compliance. In addition, findings from reviewing relevant literature in the implementation of tax are also drawn for the development of the conceptual framework.
Findings – The proposed conceptual framework can be used to empirically test the direct relationship of the organization’s characteristics and its efficacy on VAT compliance. Additionally, the moderation effect of government supports on the SMEs’ VAT compliance is also proposed. There are five sub-construct for government supports, four sub-constructs for organizational characteristics, four sub-constructs for efficacy and three sub-constructs for VAT compliance. The government supports is expected to be able to moderate the relationship between organizational characteristics and efficacy with VAT compliance of the SMEs.
Practical Implications – The proposed link between SME VAT compliance and the SME characteristics and efficacy in terms of VAT and government support call for government and SMEs actions toward simplifying the VAT process, overcoming the VAT implementation barriers, and strengthening the SMEs characteristics for effective VAT compliance.
Originality/value – This paper helps arrive at a VAT governance framework that optimises compliance as fundamental to the fulfilment of the long-anticipated role of VAT as a delicate income source for global economies. To empirically support the proposed model, the paper aspires to build on the secondary data.