This study aims to analyze how tax investigation, value added tax (VAT) complexity and VAT sanctions affect VAT compliance. It also seeks to determine how national pride moderate the presence of these impacts among Jordanian family small and medium enterprises (FSMEs).
In this study, 640 questionnaires were distributed using systematic random sampling to FSMEs in Jordan, after which a total of 358 questionnaires were deemed useable and suitable for analysis. Partial least squares-structural equation modeling (PLS-SEM) was used to validate the measurement model, structural model and the predictive relevance of the study's model.
The study found that VAT system complexity reduces compliance, while VAT sanctions and tax investigations increase compliance. Moreover, national pride significantly strengthens the effects of tax investigations, VAT complexity and sanctions on compliance, highlighting the interplay between enforcement measures and socio-psychological factors.
Policymakers should simplify the VAT system and ensure effective enforcement through sanctions and investigations. At the same time, strategies that foster national pride and civic responsibility could enhance the effectiveness of these measures, encouraging small and medium-sized enterprises (SMEs) to comply voluntarily with VAT regulations.
This study extends deterrence theory in the context of VAT compliance by demonstrating that national pride plays a moderating role in shaping the compliance behavior of FSMEs. By integrating social identity considerations into a traditionally enforcement-based framework, the study provides a more nuanced explanation of VAT compliance in an emerging economy. In addition, the study highlights the practical suitability of PLS-SEM, for examining extended deterrence models that incorporate moderating effects. The findings offer important implications for both theory development and practice, particularly in designing VAT enforcement strategies that account for behavioral and social factors.
