Các yếu tố ảnh hưởng đến không tuân thủ thuế của doanh nghiệp tt tiếng anh

MINISTRY OF EDUCATION AND TRAINING

STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

NGUYEN VIET HONG ANH

FACTORS AFFECTING TAX
NONCOMPLIANCE OF ENTERPRISES

SUMMARY OF Ph.D. THESIS

HO CHI MINH CITY – 2019


MINISTRY OF EDUCATION AND TRAINING

STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

NGUYEN VIET HONG ANH

FACTORS AFFECTING TAX
NONCOMPLIANCE OF ENTERPRISES

SUMMARY OF Ph.D. THESIS

Major: Finance and Banking
Code: 9 34 02 01

Academic advisor: Assoc Prof. Dr. NGUYEN THI LOAN

HO CHI MINH CITY – 2019


LIST OF AUTHOR’S PUBLICATION
1. ‘Anh huong cua thue den cau truc von cua cac doanh nghiep Viet Nam’,
Banking Science & Training Review. ISSN 1859-011X, 168,34-42, 2016.
2. ‘Anh huong cua thay doi moi truong phap ly ve ke toan – thue va cac luu y doi
voi doanh nghiep tai Viet Nam, Journal of Development and Integration. ISSN
1859-428X, 29(39), 53-61, 2016.
3. ‘The effects of tax on corporate capital structure related Vietnam’s participation
in TPP’,Advanced Technology & sustainable development (ICATSD2016).
ISBN: 978-604-920-040-3, (08/2016), 1486-1493, 2016.
4. ‘Nghien cuu hanh vi gian lan thue cua cac doanh nghiep tai Viet Nam’, Banking
Technology Review. ISSN 1859-3682, 134, 84-92, 2017.
5. ‘Detecting Corporate Income Tax Non-compliance from Financial Statements:
A case study of Vietnam’, Studies in Computational Intelligence, Econometrics
for Financial Applications, Springer Verlag, Cham, Switzerland. (Scopus). DOI:
10.1007/978-3-319-73150-6_52, 760, 656-672, 2018.
6. ‘Application of Statistical Methods for Tax Inspection of Enterprises: A case
study in Vietnam’, Studies in Computational Intelligence, Econometrics for
Financial Applications, Springer Verlag, Cham, Switzerland. (Scopus). DOI:
10.1007/978-3-319-73150-6_51, 760, 648-655, 2018
7. ‘Phat hien sai sot va gian lan thong tin tren bao cao tai chinh cua doanh nghiep:
Nghien cuu tai Viet Nam’, Banking Review. ISSN – 0866 – 7462, 14, 34-41,
2018.
8. ‘Cac yeu to ve nguon luc trong tang truong kinh te: Nghien cuu tai vung kinh te
trong diem phia Nam’, National scientific conference on “Mechanisms and
policies to generate capital resources for the Southern key economic region”.

Lao dong Publisher, 61-70, 2018.
9. ‘Giai phap doi voi chinh sach tai chinh gop phan phat trien vung kinh te trong
diem phia Nam’, National scientific conference on “Mechanisms and policies to
generate capital resources for the Southern key economic region”. Lao dong
Publisher, 217-223, 2018.
10. Scientific research topic: “Phan tich gian lan thue tai doanh nghiep Viet Nam” –
Code: CT – 1709-66 – Year 2017 – Banking University of Ho Chi Minh City,
Member.


1

CHAPTER 1: INTRODUCTION
1.1.

REASONS FOR CHOOSING THE RESEARCH TOPIC

1.1.1. National and international research backgrounds
For a long time, taxes have known as the form of in-kind revenues; and
overtime, they developed into the form of currency gradually. These are
compulsory and limited contributions to the government (Phan Hien Minh et
al.2001). Since taxes were born, taxpayers’ obligations were also formed.
According to Noor et al. (2013), the government has been becoming more and more
concerned about tax noncompliance and tax evasion because these activities
reduced the efforts of increasing the national budget revenue. Tax noncompliance
occurs when taxpayers fail to comply with their tax obligations as a result of
reducing the tax payable amount for the State budget (Franzoni 1998; Lewis et al.
2009). According to Halon et al. (2005), studying tax noncompliance is a very
important issue affecting the operation of the tax system in each country.
Like other countries, the government of Vietnam always pays attention to the

tax administration of the country, especially the tax obligations of businesses.
According to the Ministry of Finance (2016), throughout several periods: from 2001
to 2005; from 2006 to 2010 and from 2011 to 2015, the proportion of tax revenue
presented that corporate income tax was always the major revenue source strongly
concerned by our government.
Under current regulations, enterprises are obliged to declare and pay the
annual corporate income tax to the tax authorities. However, according to the
statistic of the Ministry of Finance, the tax inspection results showed that the
current situation of Vietnamese enterprises’ tax noncompliance is currently a crucial
issue of the government (Kien and Nga 2017). Although enterprises are obliged to
declare to pay taxes themselves, if there were no tax inspections and tax
examinations, the loss of national budget revenue would be increasing. The number
of tax arrears and the number of fraud enterprises has increased during many years,
proving that tax noncompliance behaviors of enterprises have been becoming more
and more popular. In the field of Vietnamese tax administration, the government
has to find out effective solutions in order to solve this problem.
1.1.2. Overview of related research and scientific gaps
During several decades, the research history had many published scientific
studies on tax noncompliance, many of which had different approaches. Studies of
Yalama and Gumus (2013); Abdixhiku (2013); Awan and Hanna (2014);
Yahyapour et al (2015) used the survey method by questionnaires to exploit the data
from taxpayers. Tax noncompliance is measured by the ratio of annual tax
payments to total income or self-assessment of tax compliance attitude by the
respondents. Studies of Mills (1996); Joulfaian and Rider (1998); Hanlon et al
(2005); Zainal Abidin et al (2010); Lisowsky (2010); Noor et al (2012); Noor et al
(2013); Yusof et al. (2014) presented an empirical research model about the factors


2

affecting tax noncompliance of enterprises, while tax noncompliance was realized
as the false declaration of taxable income or factors of taxed income bases such as
revenue and expenses of businesses. By simulation analysis method based on the
relationship between the information on financial statements and the data of
corporate income tax declaration, Vu Huu Duc et al. (2009) demonstrated a number
of factors that have effects on the cause of tax gaps during the enterprises’ tax
declaration in Vietnam. Phan My Hanh (2003); GIZ Sector Program Finance
(2010); Le Xuan Truong and Nguyen Dinh Chien (2013) synthesized and analyzed
the factors associating with the causes of tax fraud, mentioned tax evasion leading
to budget losses and suggested the measures to reduce tax noncompliance of
enterprises.
In the view of previous researchers, the studies on tax noncompliance
showed that although there were many approaches, most of the researchers in the
world exploited tax noncompliance related to hiding the income tax and the amount
of tax payable. However, the thesis realized that there were still some certain
research holes in the previous studies on tax noncompliance of enterprises. Firstly,
some studies in the world concluded the factors affecting tax noncompliance on the
database formed by the survey method, which makes the results may be general and
the measuring of factors not be reliable. These studies did not mention the
information reflecting on the financial statements, which was a legal basis to assess
the tax obligations of businesses. Secondly, some of the researches from foreign
authors have neither reflected the situation of tax law violations nor proposed
solutions to reduce the non-compliance with the quantitative results. They only
mentioned some conclusions from the impact of the factors in the quantitative
regression results. Thirdly, most of the studies in Vietnam about tax noncompliance of enterprises were approached from the actual happening of tax law
violations in combination with the theoretical analysis. Some of them have built the
quantitative model with primary data sources collected from taxpayers’ surveys, but
these studies have not yet carried out the regression and examination in the
secondary data set such as the data of tax declaration or the information from
financial statements of enterprises.

In the theoretical point of view, the theoretical background of tax
noncompliance and tax fraud has been still controversial when studying the factors
affecting tax fraud or tax noncompliance based on the economic deterrence models
as well as fiscal and social psychology models (Devos 2014). Therefore, previous
authors over the world have also affirmed the need of the combination between
factors affecting taxpayers’ compliance and their behavior levels to study tax
compliance issue and the data on financial statements must be also analyzed when
studying the factors affecting tax noncompliance of enterprises.
From the research background as well as the gaps in previous studies, the
author has chosen the thesis topic: “Factors affecting tax noncompliance of
enterprises”. The thesis will research tax noncompliance based on income tax


3

obligations, consistent with the majority of research points of view over the world.
By combining many researching methods, including the exploitation of information,
practical experience from taxpayers, tax authorities and quantitative research
models, the thesis will determine the influencing of factors on tax noncompliance of
companies which was reflected by illegal activities under the Vietnamese tax law’ s
circumstances. The research topic not only concludes the affecting of factors but
also analyzes the current situation of enterprises’ tax noncompliance and suggests
some solutions for this problem.
1.2.

OBJECTIVES AND RESEARCH QUESTIONS

1.2.1. Objectives of the study
There are three specific objectives of the study, included:
 Identify violations of Vietnamese tax laws by declaring corporate income tax

obligations.
 Identify factors affecting tax noncompliance of enterprises in declaring
corporate income tax in accordance with Vietnamese tax law and mention some
limitations of tax administration in Viet Nam.
 Propose solutions to contribute to reducing the tax noncompliance of
enterprises in declaring corporate income tax obligations under the legal framework
of Vietnamese tax law.
1.2.2. Research questions of the study
 How many violation activities in declaring corporate income tax under the
Vietnamese tax law? How do they carry out?
 What are the factors affecting tax noncompliance of enterprises in declaring
corporate income tax in accordance with Vietnamese tax law? How do these factors
tend to affect corporate income tax noncompliance? What are the limitations of the
tax administration for enterprises under the Vietnamese tax law?
 From the limitations of tax administration and the relationship between the
factors affecting corporate tax noncompliance, what are the solutions to contribute
to reducing the tax noncompliance of enterprises in declaring corporate income tax
obligations under the legal framework of Vietnamese tax law?
1.3.

SUBJECTS AND RESEARCH SCOPES

1.3.1. Subjects of the study
The thesis researched the factors affecting tax noncompliance of enterprises.
Tax noncompliance was reflected by some illegal activities in declaring information
on corporate income tax obligations under the Vietnamese tax law’s conditions.
These tax evasions have been concluded by the tax authorities through the process
of tax inspections and tax examinations every year.

4

1.3.2. Research scopes
Research content:
• The thesis limited the research content in the corporate income tax obligations
which have been regulated in the Law on enterprise income tax of Vietnam and the
guiding legal documents.
• Enterprises studied in the thesis were domestic companies, non-financial and nonstate enterprises established under the Vietnamese law on enterprises. The thesis did
not mention foreign-invested enterprises as well as the enterprises in the field of
real estate business and securities transferring. The author did not mention the
content related to corporate income tax exemption or reduction.
- Research space: The scope of the research included the enterprises in Ho Chi
Minh City.
- Research period: To ensure the update of the research data, as well as the changes
in tax policy in Vietnam, the period for researching of this thesis, was from 2013 to
2017.
1.4.

METHODOLOGY AND RESEARCH DATA

1.4.1. Methodology research
A systematic approach with descriptive, analytical, synthesized, and
comparative methods were used throughout the content of the thesis.
In order to identify the forms of Vietnamese tax law violations on enterprises
about income tax declaration, the thesis used the method of synthesizing theoretical
basis combined with the results of group discussions among tax managing experts
from tax authorities and discussing with the business representatives who have been
inspected and examined taxes. The research methods were combined to exploit indepth information from the reality of violations and experiences of tax professionals
in Vietnam, in accordance with some previous research using, such as Yalama and
Gumus (2013); Yahyapour and colleagues (2015).

The combination of the actual data analysis method with the group
discussion tool and the mentioned discussion above with the Probit regression
method on the data set includes 935 observations (5 years x 187 enterprises, which
have been inspected for tax audits for 5 years from 2013 to 2017) determined the
factors affecting tax non-compliance of enterprises in Vietnam’s legal environment.
Quantitative regression methods have been implemented in many previous studies
such as Lisowsky (2010); Noor et al (2012); Noor et al (2013); Yusof et al (2014).
1.4.2. Research data
The statistical data reflecting the situation presented in the thesis is taken
from the report of the Ministry of Finance and reports of the Ho Chi Minh City Tax
Department during the period from 2013 to 2017.


5

The process of exploiting data from group discussion and interviewing was
carried out in Ho Chi Minh City. The data set used in the research model was the
balance sheet data of 187 enterprises, randomly selected among the enterprises that
have had the results of tax inspection from tax authorities during the study period
from 2013 to 2017.
The data source was collected from the Vietnamese tax information system
about the enterprises’ obligations, such as tax reports, financial statements and the
annual tax examination results of tax authorities.
1.5.

NEW FINDINGS AND CONTRIBUTIONS OF THE THESIS

1.5.1. Theoretically
The thesis has approached a research method that has not been implemented
before in Vietnam, which was a combination of primary and secondary data to

confirm the hypothesis about the impact of factors on tax non-compliance of the
enterprise (the obligation to declare and pay CIT)
(1)
Primary data was collected through interviews and direct discussions
with tax professionals and representatives of enterprises that have been audited by
the tax authorities to verify the annual CIT declaration data. With the information
collected from two objects: one side was those who directly manage and examine
the declared data of enterprises about tax obligations, one side was ones who
performed tax obligations on the basis of legal documents and tax regulations of the
State. The updated information collected with this method to exploit the situation of
factors affecting the false declaration of enterprises about CIT, reflecting some of
breaking tax laws activities of enterprises, that was the basis for comparing previous
research results in the world.
(2)
With secondary data, the indicators of tax declaration on financial
statements and inspection results about the compliance with tax laws of enterprises,
the results of regressing model of factors affecting tax non-compliance of
enterprises had a legal basis to assess the tax compliance of the enterprise because
the tax agency determined the tax compliance of companies based on the
information of financial statements. The results of the study provided empirical
evidences for The Fraud Triangle theory of Cressey (1953) in the field of tax noncompliance. Specifically, the factors affecting tax non-compliance were derived
from causes of pressure, opportunity and attitude that lead to tax violations.
1.5.2. Practically
Firstly, the thesis has a new point when researching in the scope of tax
noncompliance of Vietnamese enterprises related to corporate income tax with
updated information through the direct discussions with tax officials as well as
business representatives; thereby reflecting the practical research content.
Secondly, by the Probit regression method on the data set to declare the
corporate income tax obligations of enterprises that have been inspected by the tax
authorities and have concluded whether the amount of paying corporate income tax

6

must be remitted into the budget, the results show that the experimental research
model has the accuracy classification index of over 70%.The result of the proposed
model can be applied to classify and assess the tax noncompliance of enterprises
through annual CIT declaration data. Since then, the tax authorities have initial
evaluations of tax compliance of enterprises throughout a declared data
scientifically.
Thirdly, with the development of many different industries nowadays, the
research results of the thesis have provided evidence that enterprises in different
business sectors have different levels of tax compliance. This was a contribution of
the thesis that helps tax authorities realize an important role of business field in tax
administration of enterprises. It is necessary that the tax officials have to timely
update the information of the business field in the database of enterprises in order to
have an accurate classification of enterprises’ tax compliance level.
Fourthly, the result of the thesis showed that most of the influent factors
have been measured by the indicators of financial statements which are the legal
basis for declaring the amount of tax payable of companies. Based on this, the thesis
not only suggested some solutions in tax administration for enterprises but also
proposed several recommendations about current Vietnamese Corporate Income
Tax law in order to reduce tax noncompliance of enterprises.
1.6.

STRUCTURE OF THE THESIS

To achieve the above objectives, the thesis was structured into five chapters
as the followings:
Chapter 1: Introduction

Chapter 2: Theoretical foundation of enterprises’ tax noncompliance
Chapter 3: Methodology and research model
Chapter 4: Research results of the factors affecting tax noncompliance of
enterprises
Chapter 5: Conclusions and suggesting solutions for reducing tax noncompliance of
enterprises


7

CHAPTER 2: THEORETICAL FOUNDATION OF ENTERPRISES’ TAX
NONCOMPLIANCE
2.1.

OVERVIEW OF TAX AND CORPORATE INCOME TAX

2.1.1. The definition of tax and the nature of tax
2.1.1.1.

The definition of tax

According to OECD (1996), the term "tax" is a mandatory, limited
contribution to the government. The taxes will be refunded accordingly by the
benefits brought by the government in a special form. Tax does not include fines
relating to tax violations and loans that are required to be paid to the government.
2.1.1.2.

The nature of tax

Phan Hien Minh et al. (2001) wrote that the tax has existed for a long time

since the State slavery, creating social conflicts; so the first nature of taxation is the
enforcement of financial resources from the people. The second characteristic of
taxation is that there is no compatibility between paying taxes and the benefits
received from tax payments (Phan Hien Minh et al. 2001). Therefore, tax is a
category related to the State, the law and the enforcement. There is no compatibility
between the tax payable and the benefits, so the performance of the tax obligation is
often less voluntary.
2.1.2. The role of tax
The tax has two functions which are the distribution as well as redistribution,
and the regulating tool of the economy (Phan Hien Minh et al 2001; Le Quang
Cuong and Nguyen Kim Quyen 2015). Two functions of tax show that tax plays a
very important role in the economy because every change of tax law has a great
influence on the activities of entities in the business process. Therefore, the
governments of all countries always pay attention to tax revenue and use the system
of tax law as a tool to regulate the macro economy.
2.1.3. The classification of tax
According to Su Dinh Thanh and Bui Thi Mai Hoai (2010), classifying taxes
is necessary to consider the impact of taxes in the flow of income and consumption
in society.
In the economic point of view, income can be understood on the basis of the
theory of assets and asset growth. "According to the theory of increasing net assets,
income is the sum of the values of benefits enjoying in terms of consumption and
added value in the total ownership of a subject during a definite period of time." (Su
Dinh Thanh and Bui Thi Mai Hoai 2010, page 294).
In terms of tax collection, income is clearly defined in tax laws in each
country which is created from working, business activities or a certain relationship
in society. Therefore, each entity in the economy, when generating income, must
pay tax on their income to the state budget. Since then, the tax liability of each

8

entity is also formed with different taxes depending on each country. According to
Su Dinh Thanh and Phan Thi Mai Hoai (2010), the analysis of the flow of social
income and expenditure shows that income tax is the first basic tax that the
government concerns about when building the national tax system; then people
must pay indirect taxes such as value-added tax, special when they use their income
to consume goods in the market. Finally, property taxes levied on income which is
transformed into assets such as registration tax, housing tax ...
2.1.3.1.

Classifying based on taxpayer

- Indirect taxes: the amount of tax collected from consuming and fixed in an
additional surcharge in the price of goods and services in the market.
- Direct taxes: the amount of tax collected directly from individuals and
institutions based on their income or taxable assets under the regulation.
2.1.3.2.

Classifying based on taxable objects

- Income tax put on the income generated from different sources such as
salaries, wages, profits from production and business activities.
- Consumption tax is a type of tax imposed on consuming goods and supply
services.
- Property tax is a type of tax levied on the possession, using or transferring
assets.
2.1.4. Overview of corporate income tax
2.1.4.1.

The definition of corporate income tax

According to the Cambridge dictionary, the corporate income tax is the
amount of tax that businesses must pay for their profits.
According to Vietnamese dictionary, an income tax is a kind of tax imposed
on the income of individuals and institutions. In the case of companies’ income, it is
called corporate tax or corporate income tax.
According to the general document of Le Thi Thanh Ha et al (2007),
corporate income tax is also called a corporate tax. This is a direct tax on
enterprises' income. Corporate income tax is stipulated in details in the Tax laws of
each country on over the world.
2.1.4.2.

The basic factors of corporate income tax

- Taxpayers are enterprises having taxable income in a country.
- Taxable objects: net income or taxable income.
- Corporate income tax rate: shows the proportion of tax contributed to the
state budget on taxable income.
2.1.4.3.

Corporate income tax of some countries


9

2.2.

THEORETICAL
FOUNDATION

RELATED
NONCOMPLIANCE OF ENTERPRISES

TO

TAX

2.2.1. The definition of tax compliance and tax noncompliance
2.2.1.1.

Tax compliance

For a long time, Alm's research (1991) introduced that the concept of tax
compliance is the accurate declaration of income and expenses imposed on Tax
Law. Andreoni et al. (1998) argued that tax compliance is defined as the willingness
of taxpayers, the compliance with regulations to obtain a country's equilibrium
economy. McBarnett (2003) identified three types of compliance, including
compliance with commitment, compliance with surrender (involuntary), creative
compliance.
In general, the concept of tax compliance was discussed by the researchers in
the direction of research - taxpayers are willing or unwilling to comply with tax
obligations (Nguyen Minh Ha et al. 2012). The precise meaning of tax compliance
is defined in different ways depending on the perspective and approach of the
researchers.
2.2.1.2.

Tax noncompliance

According to Nguyen Minh Ha et al. (2012), the traditional view of tax
administration was mainly based on the assumption that only when businesses were

forced or affected by economic interest are they willing to comply. Therefore, the
concept of tax noncompliance was formed in conjunction with the tax compliance
point of view.
- Identification of tax compliance and non compliance based on Alabede et al
(2011)
- Tax compliance triangle of BISEP (OECD 2004)
- Some concepts of tax noncompliance of enterprises from previous studies
Inheriting the previous point of view in accordance with the objectives as
well as the scope of the study, the thesis concludes the concept of tax
noncompliance is that enterprises do not declare their tax obligations properly
related to their income, reflecting the amount of corporate income tax payable for
the State budget. Those are violations of Vietnamese tax law in the declaration of
corporate income tax and loss of revenue for the state budget including tax fraud
and tax evasion. For businesses, tax noncompliance is expressed by the figures on
the financial statements declared to the tax administration agency.
2.2.2. The theoretical framework for researching tax noncompliance
2.2.2.1.

The theory of Economic Deterrence model

The principles of economic deterrence models were first discovered in the
1960s from Becker’s study (1968), the researcher analyzed illegal behavior using


10

the same economic theory framework. Becker (1968) proposed a narrow argument
that deterrent measures such as probabilities of detecting penalties and penalties
affecting compliance. By the 1970s, based on “Utility Theory”, Allingham and
Sandmo (1972) argued that taxpayers would find their ways to optimize the

interests to make decisions to comply in tax reports in which tax evasion occurs if
financial benefits are lower than financial costs. Since then, the economic
deterrence models have been developed with the view that deterrence has
influenced compliance.
From the economic deterrence models’ point of view, scientists have
summarized the effectiveness of the determinants of financial costs that affect tax
compliance, such as the complexity of the tax system, tax rates, probability of
finding violations, income levels, and penalty structures. However, there are few
shreds of empirical evidence proving the predictions of the economic deterrence
model are absolutely correct. Jackson and Milliron (1986) in Devos (2014) argued
that although the above factors have been tested, there is no conclusion about the
relationship between these factors and noncompliance. Hence, when the economic
deterrence model and its shortcomings are considered, it is clear that the following
studies need to learn more to solve the problem of tax evasion and non-compliance
(Devos 2014).
2.2.2.2.

The theory of Fiscal and Social Psychology Model

The Fiscal and Social Psychology Model show both the aspects of economic
deterrence model and the psychological theory’s point of view. The essential focus
of this approach is that individuals are not people who optimize their independent
interests, but those are recognized to have attitudes and beliefs responding to social
demand. The research tendency of Fiscal and Social Psychology Model is to
examine human factors affecting tax attitudes and behavior. Factors affecting tax
compliance perceived from this model's perspective have changed from social
norms and individual characteristics to the perception of fairness and attitude of
taxpayers (Devos 2014 ).
On the one hand, taxes are regulated by the legal system in each country and
tax non-compliance of enterprises is studied to be tax evasions lead to the loss of

corporate income tax for the state budget. According to the model of Alabede et al.
(2011), tax non-compliance includes the concept of tax fraud, so the theory of fraud
will be mentioned for the analysis to find a framework for the thesis.
2.2.2.3.

The theory of fraud

The history of research has demonstrated that the theory of Fraud Triangle
Model of Cressey (1953), as well as the theory of fraud from Albrecht et al (1984),
are undeniable when studying fraud in the economic field.


11

Figure 2.5: The Fraud Triangle Model of Cressey (1953)
Pressure

Opportunity

Attitude/Rationalization
(Source: Wells 2011)

The result of Cressey (1953) suggested a model of the fraudulent triangle
(Fraud Triangle) with the content that fraud, criminal activities or law violations are
only carried out based on a sufficient basis of three factors - opportunity, pressure
(motivation) and personality attitude or rationalization of human fraud behavior
(Figure 2.5)
The theoretical model of Albrecht et al. (1984) has shown that the
probability of fraud is very high when the circumstances create pressure,
opportunities for committing fraud together with the integrity of personal is low. In

contrast, there is little chance for the occurrence of fraud while circumstances do
not create pressure, and there are few opportunities for committing fraud and the
integrity of personnel is high. According to the study, circumstances that create
pressure may be related to financial difficulties; opportunities for fraudulent activity
may be created by individuals or due to the weakness of the control system. Like
the theory of Fraud Triangle Model of Cressey (1953), this theory is applied to the
empirical studies for detecting violations of law and fraud in many different areas.
2.2.2.4.

Discussion

On the one hand, the content of the thesis is tax noncompliance related to tax
evasions leading to tax losses and tax fraud in which the theory of Fraud Triangle
Model of Cressey (1953) has been widely applied to analyze factors affecting law
violations in previous studies in financial and economic fields on over the world.
Moreover, according to Devos (2014), attitudes and opportunities are elements that
have been found to have an impact on tax compliance in the process of developing
research based on Fiscal and Social Psychology Model; pressure is a factor that
influences behavior change from tax compliance to tax noncompliance that BISEP's
compliance triangle presented (Figure 2.4). Therefore, the theory of Fraud Triangle
Model of Cressey (1953) will be used as a basis for analyzing and building models


12

of factors affecting tax noncompliance of enterprises under Vietnamese tax law
environment, which is in the sense that the probability of fraud is on the rise in
correlation with the pressure and opportunities for committing fraud while the
compliant attitude is low.
2.2.3. The factors affecting tax noncompliance

2.2.3.1.

The quality of public services

2.2.3.2.

The level of corruption

2.2.3.3.

The level of penalties for tax fraud

2.2.3.4.

The management of tax collection and tax administration

2.2.3.5.

The system of tax law and the point of view about justice

2.2.3.6.

Compliance costs

2.2.4. Conclusion about the theoretical framework applied to analyze
factors affecting tax noncompliance based on the Fraud Triangle of
Cressey (1953)
With the research orientation mentioned in Section 2.2.2, the theory of Fraud
Triangle Model of Cressey (1953)is used as a theoretical framework to study the
factors affecting tax non-compliance with the meaning analyzed following:

- Pressure (Motivation) will be analyzed in terms of tax pressure or
motivation leading to tax non-compliance. The higher pressure means more
motivations for taxpayers to perform tax non-compliance based on the Fraud
Triangle Model so that factors referring to tax pressure will have a positive
correlation with tax non-compliance.
- Opportunities will be analyzed in terms of gaps related to the performance
of tax obligations that create opportunities for taxpayers to perform noncompliances: According to the Fraud Triangle Model, the more opportunities or
loopholes there are, the easier tax non-compliance will be carried out; therefore,
meaningful factors that create opportunities for tax evasions will have a positive
correlation with tax non-compliance.
- The attitude (the rationalization of fraudulent behavior) is studied in the
aspect of the spirit of taxpayers, the perception of tax payment obligations as well
as the willingness to comply with taxes. According to the Fraud Triangle Model,
factors reflecting the attitude of taxpayers have a positive or negative correlation
with tax non-compliance. The latter occurs when the positive attitude of taxpayers
will limit tax non-compliance and vice versa.
On the basis of the explanations of previous studies about factors affecting
tax noncompliance in section 2.2.3 and the meaning of the theory of Fraud Triangle
Model of Cressey (1953), the thesis has concluded that: (1) The quality of public
services; (2) The level of corruption; (3) The level of penalties for tax fraud are


13

factors reflecting the attitude as well as the cause of low tax payment and affect the
tax non-compliance behavior of enterprises. Meanwhile, compliance costs are
ingredients that demonstrate tax pressure, creating incentives for taxpayers to
decide on carrying out tax non-compliance behavior. Finally, (1) The system of tax
law and the point of view about justice; (2) The management of tax collection are
two components providing opportunities and loopholes for taxpayers not to fulfill

their obligations.
2.3.

OVERVIEW OF RELATED FIELD RESEARCH STUDIES

2.3.1. The international studies
Some studies such as GIZ Sector Program Public Finance - Public finance
program of the Government of Germany (2010), Abdixhiku (2013), Sapiei and
colleagues (2014), Awan and Hannan (2014), Yahyapour and colleagues ( 2015)
analyzed the factors affecting tax fraud given in the model as the cause of tax
evasion.
In addition, a number of studies have found a link between tax noncompliance and information on the financial statements, while giving comments on
tax non-compliance of enterprises based on the information about the financial
statements which reflect through the lack of the amount of declared corporate
income tax such as Lisowsky (2010), Noor et al (2012), Noor et al (2013), Yusof et
al (2014). Mills (1996) studied tax compliance and financial performance of
enterprises. He said that the tax authorities found that the disparities in the amount
of corporate income tax will experience a growth in proportion to between the book
profits and the taxable income the business has already declared. The fraud on
financial statements will result in both the mismatch of tax reports and one of the
manifestations of tax evasion of tax noncompliance of businesses (Frank et al.
2009).
2.3.2. The national studies
Vu Huu Duc et al. (2009); Le Xuan Truong and Nguyen Dinh Chien (2013)
focused on violations, tax fraud and tax evasion of enterprises in which the former
concluded that the indicators on financial statements are related to the corporate
income tax compliance expressed by the difference between the self-declared
corporate income tax and the inspection results of tax office. The study of Le Xuan
Truong and Nguyen Dinh Chien in 2013 partly illustrated the specific violations of
tax frauds of enterprises so that the tax authorities have had some resolutions to

reduce this situation.
Besides, a number of factors have an impact on the tax compliance of
enterprises in the study of Nguyen Minh Ha and Nguyen Hoang Quan (2012); Bui
Ngoc Toan (2017) suggested that as a research model is being built, it is necessary
to regard the variables affecting taxpayers' behaviors more fully in addition to the
financial elements. The methods applied in previous studies include analysis,
synthesis and survey techniques. Some studies have used quantitative methods such


14

as multiple regression, exploratory factor analysis (EFA), and Logit regression to
accomplish the research objectives of each topic.
2.3.3. Discussion about previous studies
2.3.3.1.

The methodology of previous studies

Some studies only use a single method such as interview, survey or
theoretical analysis method, descriptive statistics to summarize the research content.
Some other studies combine several methods including quantitative research.
By OLS regression techniques, Tobit regression, and Logistic regression, previous
studies have conducted the hypothesis testing to give a conclusion regarding the
factors affecting tax non-compliance.
2.3.3.2.

The practical research model of previous studies

Apart from some studies that only analyze the situation, statistical analysis
without building research models, there are many approaches to previous studies in

the world constructing experimental research models.
The majority of studies were conducted on the basis of economic deterrence
model theory and inherited the previous research model. Through the incomplete
synthesis process of the author, the thesis realized that the variables included in the
research model were associated with the causes affecting tax evasion and non-tax
compliance.
2.3.3.3.

Research results

Since the thesis does not mention tax exemption and reduction, it can be
argued that the tax noncompliance is reflected in the false declaration of corporate
income tax payable amount proposing by the previous authors. Most of these are
violations of tax laws including (1) conceal revenue; (2) declare increased costs to
reduce tax obligations.
Based on the results of previous studies and a framework for analyzing the
factors that affect tax non-compliance according to the theory of Fraud Triangle
Model of Cressey (1953), the thesis formed a framework to study the factors
influencing corporate tax noncompliance reflected by causing loss of corporate
income tax in Figure 2.6 below. This will be the basis for exploiting and analyzing
actual data with the purpose of building an experimental research model in Chapter
3:


15

Figure 2.6: The framework for analyzing the factors affecting corporate
income tax noncompliance
ATTITUDE (RATIONALIZATION)
The quality of public services (+)/(-)

The level of corruption (+)
The level of penalties for tax fraud (-)
The probability of detecting tax fraud (-)

-

OPPORTUNITY (LOOPHOLES)
-

Corporate income tax/Earning before tax (-)
Financial leverage (Liability/Total asset) (+)
Inventory/Total asset (+)
Receivable/Total asset (+)
Business field (+)/(-)
Size of business (+)/(-)

CORPORATE
INCOME TAX
NONCOMPLIANCE

PRESSURE OF TAX (MOTIVATION)
Solvency (Working capital/Total asset) (-)
Revenue and cost (+)/(-)

-

(Source: The thesis synthesized and offered)
2.4.

INTERNATIONAL EXPERIENCES ON TAX ADMINISTRATION

OF LIMITATION ENTERPRISES’ TAX NONCOMPLIANCE AND
LESSONS FOR VIETNAM

2.4.1. International experiences on tax administration of limitation
enterprises’ tax noncompliance
2.4.1.1.

Experiences in some Asian countries

2.4.1.2.

Experiences in some countries in other continents

2.4.2. Experience lessons for Vietnam
Based on the experiences presented above, the thesis concluded some lessons
on measures to prevent and put a halt to tax non-compliance and tax evasion in
Vietnam enterprises as follows:
- Regarding the organization of tax administration
- Regarding tax regulations
- Regarding human resources for economic management


16

CONCLUSION OF CHAPTER 2
Chapter 2 has summarized the basic theory of tax non-compliance, some
basic provisions on corporate income tax as well as research results of previous
studies related to the content of the thesis. Simultaneously, building a theoretical
framework to analyze the factors having an influence on tax non-compliance of
enterprises from previous studies on the meaning of Fraud Triangle Model of

Cressey (1953) will be the basis for the thesis to determine the components
affecting the tax non-compliance of enterprises in the Vietnamese tax law
environment in the next section.
CHAPTER 3: METHODOLOGY AND RESEARCH MODEL
3.1.

RESEARCH DESIGN

3.2.

BUILDING RESEARCH MODEL

3.2.1. Describe the steps of the process
To build a model for studying the factors affecting tax non-compliance of
enterprises, the thesis started to collect data on the process with many stages as
follows:
- Selecting the data in accordance with the research objectives.
- Conducting data through two stages with group discussion and direct
interviewing which are carried out in Ho Chi Minh City from March 2018 to the
end of May 2018.
- Analyzing data: the thesis conducted in-depth analysis and comparison of
data at two stages of study as well as determined similarities and differences.
- Building research model: based on the results of the existing analysis, the
thesis determined the factors that are explored, compared with the theory and the
results of previous studies. Since then, the thesis proposed a model for analyzing
factors affecting tax non-compliance of enterprises.
3.2.2. Sample selection process
3.2.3. Describe the research results
3.2.3.1.

Describe research information

3.2.3.2.

Determine the factors affecting tax non-compliance


17

Table 3.3. The result of factors affecting enterprises’ tax noncompliance

Code

Factors

Number
of
samples
giving
opinions

Consensus
rate

Impact
direction
(+)/(-)

1

Corporate income tax payable/Earning
before tax

19

95%

(-)

2

Business field

19

95%

(+)/(-)

3

Size of business

15

75%

(-)

4

The number of penalties related to tax
fraud/tax payable amounts

14

70%

(-)

5

Enterprises declare losses in the previous
year

20

100%

(+)

6

Working capital/Total assets

15

75%

(-)

7

Revenue/Total assets

19

95%

(+)

8

Total debt/ Total assets

17

85%

(+)

9

Inventory/ Total assets

17

85%

(+)

10

Accounts receivable / sales
Accumulated depreciation expense/Total
assets

17

85%

(-)

16

80%

(+)

11

(Source: Synthesized from research data)
Table 3.4: Compare the research results of the thesis
Code

Factors affecting corporate tax
noncompliance

1

Moral duty

2

Foreign profit

3

Ownership situation

4

Corporate income tax
payable/Earning before tax

5

Business field

6

Revenue/Total assets

Comparison
The factor from previous studies was not
determined by this study
The factor from previous studies was not
determined by this study
The factor from previous studies was not
determined by this study

The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research


18

7

Total debt/ Total assets

8

Inventory/ Total assets

9

Accounts receivable / sales

10

Size of business

11

Working capital/Total assets

13

The amount of penalties related
to tax fraud/ tax payable
amounts
Enterprises declare losses in
the previous year

14

Accumulated depreciation
expense/Total assets

15

Feeling about public service

16

The financial situation of the
enterprise

17

Legal status

18

Belief in the government

12

3.3.

The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
The factor of this study was confirmed from
previous research
A new factor has not been confirmed from
previous research
A new factor has not been confirmed from
previous research
The factor of this study was not included in the
research model
The factor of this study was not included in the
research model
The factor of this study was not included in the
research model
The factor of this study was not included in the
research model
(Source: The author synthesized and compared)

QUANTITATIVE RESEARCH

3.3.1. The model of factors affecting enterprises’ tax noncompliance
3.3.1.1. The proposed research model
Based on the above research results, the thesis proposed an empirical
research model consisting of 11 factors affecting the tax non-compliance of
enterprises as follows (Figure 3.7):


19

Figure 3.7: The proposed research model
Corporate income tax
payable/Earning before tax

Revenue/Total assets
Working capital/Total
assets

Loss in previous year
TAX NONCOMPLIANCE

Total debt/ Total assets

Accumulated depreciation
expense/Total assets

Inventory/ Total assets

Size of business

Accounts receivable / sales

The amount of penalties
related to tax fraud/ tax
payable amounts

Business field
(Source: The author synthesized and proposed)
11 factors in the proposed research model are consistent with previous
studies such as Noor et al. (2012); Yusoft et al (2014). While the research model of
Noor et al. (2012) contained most of the financial factors to examine the impact on
tax non-compliance of enterprises, Yusoft et al (2014) proposed a variable
presenting industry to classify and assess how the differences of enterprises in
various business fields influence the tax noncompliance.
3.3.1.2.

The methodology

Inheriting Lisowsky (2010), the thesis built a model of factors affecting tax
non-compliance of enterprises with a dependent variable is a binary variable to
assess the ability of tax non-compliance.
According to Scott (1997), OLS regression is not appropriate because the
hypothesis will be violated if the dependent variable of the model is a binary
variable. Similar to the Logit model used in Lisowsky (2010), the thesis applied
Probit regression model to perform testing of factors affecting tax non-compliance
of enterprises as follows:
= Pr ( = 1| ) = Pr (

∗

≤ ) = Pr (

≤

) = F(

)

In particular,
represents the probability of a tax non-compliance
observation (tax fraud leading to the difference of corporate income tax obligations)
and F (BX) is called Probit functions.


20

Therefore, the thesis will present the research model in the form of Probit
probability regression equation as follows:
Y=

+

+

(1)

Y: Binary variable, get a value of 0 or 1
Y = 1: Observation is defined as non-tax compliance;
Y = 0: Observation is defined as tax compliance;

Xi: Independent variables;
: Coefficient of independent variables;
: Random error of the model.
In theory, the difference between Logit and Probit is mainly concentrated on
the distribution function of the errors. While the Logit model assumes standard
Logit distribution errors, the errors of the Probit model are assumed to have a
normal distribution. In fact, the choice of models between Logit and Probit models
depends on the theoretical framework or the author's perspective. The estimated
results of the two models have almost no difference in the variance of the
explanatory variable coefficients. (Scott 1997)
3.3.2. Explaining variables in the model and developing hypotheses
Figure 3.5: Summary of variables in the proposed research model

Code

Name of
variables

Symbol

1

Tax
noncomplianc
e

nct

2

Working
capital/
Total
assets

3

Revenue /
Total
assets

The author of
the previous
Formula
study
mentioned
Dependent variable
Lisowsky
Binary variable: has a
(2010); Nguyen
value of 1 if it is a non-tax
Minh Ha and
compliant form; otherwise,
Nguyen Hoang
it has a value of 0.
Quan (2012)
Independent variable

wc

Spathis (2002);
Noor et al.
(2012); Yusof et
al. (2014)

(Money + Short-term
investments + Short-term
receivables)/ Total assets

sale

Vu Huu Duc et
al. (2009); Noor
vàcộngsự

(Total Revenue / Total
Assets)

Hypothesis of
previous studies

Companies with
lower working capital
ratios / total assets
might be encouraged
to non-compliant.
(Noor et al. 2012;
Yusof et al. 2014).
The higher the
revenue the company

is, the more likely


21

(2012).

4

Total debt
/ Total
assets

debt

Persons (1995);
Vu Huu Duc et
al. (2009);
Lisowsky
(2010); Noor et
al. (2012);
Yusof et
al.(2014).

Total Debt / Total Assets

loss

Lou and Wang
(2009); Duong

(2011)

0: noloss in the previous
year; 1: There are losses in
the previous year

inv

Vu Huu Duc et
al. (2009); Noor
et al. (2012).

Inventory value (minus
reserve expenses) / Total
assets

7

Accounts
receivable
/ sales

ar

Vu Huu Duc et
al. (2009); Noor
et al. (2012).

8

Accumulat
ed
depreciatio
n / Total
assets

depr

9

Corporate
income tax
payable/Ea
rning
before tax

5

Loss last
year

6

Inventory /
Total
assets

etr

Accounts Receivable /

Revenue

Vu Huu Duc et
Accumulated depreciation
al. (2009), Mills
/ Total assets
(1996)
Joulfaian
(2000); Zainal
Abidinet al.
(2010); Noor et
al. (2012);
Yusof et al.
(2014)

Declaration of CIT
payable / profit before tax

they might be not to
comply with the tax.
(Noor et al. 2012)
Companies with high
financial leverage
might be more likely
to fail to comply with
the tax. (Noor et al.
2012)

The loss situation of
the company might

create opportunities
for corporate income
tax non-compliance.
(Duong 2011; Lou
and Wang 2009)
The company has the
higher the inventory,
the greater noncompliant of the tax
might happen. (Noor
et al. 2012)
The higher the
receivable rate, the
greater non-compliant
of the tax might
happen. (Noor et al.
2012)
Companies with
higher depreciation
rates might have
more impact on tax
compliance
(Mills1996)
If the companies have
a high CIT rate, they
might be compliant
tax payers. (Yusof et
al. 2014)


22

10

Size of
business

11

The
number of
penalties
related to
tax fraud/
tax
payable
amounts in
the period

12

Business
field

size

pen

field

Hanlon et al.

(2005); Zainal
Abidinet al.
(2010);
Lisowsky
(2010); Noor et
al. (2013);
Nguyen Minh
Ha and Nguyen
Hoang Quan
(2012); Yusof et
al. (2014).

Log (Total assets)

The amount of penalties
Allingham
related to tax fraud/tax
andSandmo
(1972), Yusof et payable amounts in the
period
al. (2014)

Rice (1992);
Nguyen Thi Le
Thuy (2009);
Zainal Abidinet
al. (2010);
Nguyen Minh
Ha and Nguyen
Hoang Quan

(2012); Noor et
al. (2013);
Yusof et al.
(2014); Bui
Ngoc Toan
(2017)

Dummy variable
categorizes 3 sectors:
construction; catering and
accommodation services;
Other businesses (basic
field).

There might be a
negative correlation
between business size
and tax noncompliance. (Yusof et
al. 2014).

There might be a
positive relationship
between penalties and
tax non-compliance.
(Yusof et al. 2014).

Business field might
have a relationship
with tax noncompliance of
enterprises. (Yusof et

al. 2014)

(Source: The author synthesized)