Governance Framework to Optimize Value Added Tax Compliance among SMES in Dubai
Purpose –The purpose of this study is to develop a model to understand the relationships of the organizational characteristics and implementation efficacy on the compliance of Value Added Tax (VAT) among small and medium enterprises (SMEs) n Dubai. Specifically, this paper seeks to explore the moderating effect of the government supports on the relationship between the organizational characteristics and implementation efficacy with the tax compliance of the SMEs.
Design/method/approach – A survey research to test four hypotheses for the direct and indirect relationship among the variables were designed. Data collected through questionnaire from 387 SMEs in Food and Beverages sector operating in Dubai using stratified random sampling were considered for the survey. Partial least squares structural equation modelling (PLS-SEM) was used to validate the measurement model and structural model.
Findings – The results of the study revealed that organizational characteristics and implementation efficacy has significant relationship to VAT compliance. This result indicated that effective time management in VAT related processes, comprehension of VAT laws, cost management of VAT compliance, and use of VAT external advisors, which are the components of VAT implementation efficacy, have significant positive influence on VAT compliance.The government supports were found to moderate the relationship between the organizational characteristics and implementation efficacy with VAT compliance. T
Practical Implications – VAT compliance can be greatly enhanced by improving the implementation efficacy or by overcoming the barriers through government support. Tax authorities and policy makers in the UAE and other Arab countries, may use the results to improve tax compliance among SMEs on other business sectors for the contribution of the national income.
Originality/value – This study contributes to the knowledge on the VAT governance by proposing a model that enhances tax compliance among tax payers.