(Dis)Obeying the Law: Corporate Tax Morale in Developing Countries

Ensuring high tax law compliance is one of the key objectives of every tax system, and a notoriously difficult one to attain. Yet, while tax law non-compliance is known to be significant amongst small and medium-sized enterprises (SMEs), the motivations underlying it remain surprisingly underexplored, particularly in the context of developing countries. Drawing on an extensive body of literature centred on personal income tax (PIT) compliance in developed nations, this article introduces a novel theoretical framework for understanding the tax morale of corporate taxpayers, identifying five endogenous and six exogenous motivations for tax law (non)compliance. The proposed framework is informed by a novel methodological approach, using a triangulation of primary data, including 42 interviews and 86 court cases, with a focus on value-added tax (VAT) and corporate income tax (CIT). This article offers rich new insights into corporate tax morale, addressing for the first time the crucial question: why is compliance with tax law among small businesses so low in developing countries?