A Recap of the Factors affecting Tax Evasion: Pakistan's Environment

Abstract

The purpose of this research is to present the results of qualitative analysis on the relationship between the determinants of tax evasion based on individual, social, economic, legal and departmental factors. This research synthesized 35 results from 25 individual articles from 2003 to 2022. For the convenience of policymakers, the maximum number of determinants of tax evasion are identified and further categorized into different groups. Only significant determinants of tax evasion are considered. The individual factors include the demographic as well as the ethical behaviour of taxpayers. The social factors include social behaviour, discrimination, corruption and political instability. These are some of the factors that lead to tax evasion. Level of unemployment and consumption expenditure are a few economic factors that trigger tax evasion as no amount is left, therefore taxpayer hide their actual income. Fear of punishment has a negative association with tax evasion, but this is dependent on the rule of law and legal enforcement. Poor governance and service quality are a few departmental factors that cause tax evasion. The results suggest, that there is a dire need for tax awareness campaigns, transparency in tax expenditure, mitigating corruption, simplification of the tax system, enhancement of economic quality, rule of law and its implementation, good governance and better service quality. These goals can be achieved by combining the efforts of the government and the tax department.