Tax Awareness and Compliance of Micro and Small Enterprises

Abstract

The study determined the level of awareness and the extent of tax compliance of micro and small enterprises (MSEs). It further determined whether the participants’ profile variables and tax awareness predicted tax compliance by the MSEs.  The participants in this study were 400 micro and small enterprises registered under Bureau of Internal Revenue (BIR)–Revenue District Office No. 077, Bacolod City, Philippines. A descriptive-correlational research design was used and a researcher-made questionnaire with Lawshe Content Validity Ratio (CVR) of 0.88 and Cronbach’s alpha = 0.99 were employed to gather data from 400 MSEs using the Cochran formula. Results showed that MSEs were very aware of the Bureau of Internal Revenue (BIR) requirements but were fully aware and moderately aware of the Value-Added Tax (VAT) and other percentage taxes, respectively. Findings also showed that MSEs are complying with BIR requirements to a large extent. Consequently, penalties are the highest factor that affect taxpayer compliance. Furthermore, when a regression analysis was conducted, highest educational attainment and the level of tax awareness significantly predicted the extent of tax compliance max, F (2,117) = 61.472, p < .05, R2 = .667. A tax awareness campaign to increase awareness and improve compliance was suggested.