ANÁLISIS DE REQUERIMIENTOS

SMEs have been recognized as heterogeneous in terms of business size, business duration and the sectors in which they operate (Collins & Jarvis, 2002; Cunningham & Lischeron, 1991; Hebert & Link, 1989). However, there is an increasing recognition of cultural diversity and its potential effects on tax attitudes. Coleman and Freeman (1994) observe that the “cultural background of small business people is so varied” (p. 355) and that “attitudes towards taxes and the tax system is a product of taxpayers’ cultural background” (p. 366). Their research shows that one South African business operator practiced income smoothing to avoid attention from the tax authority. They also speculate tax attitude differences between local born Australians and migrants and conjecture that business operators from low paying and unregulated tax regimes to have different taxpaying attitudes compared to those exposed to regulated tax systems (Coleman & Freeman, 1994). However, these speculations and conjectures were made without further supporting empirical evidence. Moreover they did not specify what the tax attitude differences are between the cultural groups, to provide specific information helpful to regulatory bodies even though they claim that “a strategy which is successful with one group may completely repel another” (Coleman & Freeman, 1994, p. 355). More empirical evidence on the tax compliance behaviours of the different cultural

25 groups is needed to increase our understanding of the impact of ethnicity and tax compliance. This limitation is partly addressed by Rothengatter (2005a, 2005b).

Rothengatter (2005a, 2005b) claims that ethnicity of SME operators is important in determining their tax compliance behaviour. His focus group study reveals the differences in tax attitudes between the Asians, Greeks, Lebanese, and local born Australians, with the Asians undertaking extensive tax planning to minimise taxes. The tax attitude variations were traced to the deeply embedded social networks of collectivistic Asians, Greeks and Lebanese, which in turn influenced their tax compliance behaviours. In addition, not declaring cash jobs is not considered unethical by the collectivistic SME groups, though the local born Australian SME operators perceive the practice as morally wrong. SME operators who identify themselves as Australians are more willing to contribute towards taxes than those who do not. He concludes that “ethnicity appears not to be as a significant predictor for these types of noncompliance as popular perceptions tend to suggest, because tax noncompliance is endemic and cuts across ethnic lines” (Rothengatter, 2005a, p. 294).

The use of focus groups by Rothengatter (2005a, 2005b) is useful in identifying broad compliance issues and gaining insights that otherwise may not be obvious to the researcher (Kitzinger & Barbour, 1999). However, focus groups’ findings are dependent on the perceived status of the group representatives and the more dominant voices within the group may mute the quieter ones and therefore valuable information may be lost and the results can be skewed (Arksey & Knight, 1999). Since Rothengatter’s study focused on the extent of noncompliance amongst ethnic SMEs, each ethnic group was accusing each other of tax cheating. To avoid finger pointing, a more useful approach is to study the compliance behaviours of ethnic SMEs and seek alternative views to verify their actions. This is because cultural values are embedded in an individual’s mental programming, taken for granted by the individual, and he or she is usually unaware of them (Hofstede, 1980). In addition, by taking an “etic” view and triangulating the empirical evidence of SME taxpayers, the business experts and tax practitioners may provide in-sights into the cultural underpinnings of SME taxpayers’ compliance behaviours.

Another study which linked the cultural backgrounds of SME operators to tax attitudes was undertaken by Dornstein (1976) who associated the socio-cultural background of Israelite self employed to their level of conformity to tax regulations. She discovered

26 that self employed migrants from the least developed countries, with a non-democratic socio-political background, have relatively negative attitudes toward taxes and are least conforming to tax regulation compared to other groups. In contrast, self employed from western European backgrounds are most conforming compared to all other groups, with native Israelis somewhat conforming in the middle of the scale. In addition, her research shows taxpayers who have been in the country longer are more compliant, which is consistent with the findings by Rothengatter (2005a) and Coleman and Freeman (1997).

Although now dated, Dornstein’s (1976) research was one of the few attempts to link ethnicity of SMEs to their level of tax conformity. However, her findings are based solely on taxpayer files which are provided by the tax authority. Since those taxpayer files are assessments of the tax authority of ethnic business taxpayers, her findings may be skewed, given the taxpayers’ views are not included. This is important since taxpayers are the ones required to comply with the tax regulations. Additional and different information may be found if the taxpayers’ views had been accounted for in her study. Given that Dorstein’s (1976) research is nearly 40 years old, it is worthwhile undertaking more current intra-cultural research on ethnic SME operators, and seeking their views in terms of tax perceptions and practices.

To summarise, the existing literature on tax compliance and ethnicity points to the potential effects of culture on SMEs’ tax compliance behaviours and perceptions. As a result of the sparse research conducted on SME operators’ ethnicity and tax compliance, this thesis aims to study the four largest ethnic SME groups in New Zealand and to identify their similarities and differences in their tax compliance decisions, practices and perceptions in relation to filing timely tax returns and paying their taxes on time. Empirical evidence is sought from ethnic SME operators, along with accounts given by “outsiders” to give an “etic” perspective of their tax decisions and the possible underlying cultural underpinnings of their behaviours.

As tax compliance is a socio-technical activity, taxpayers’ compliance may be shaped by more than cultural values; also significant are institutional and economic factors relating to record keeping, cash management, tax knowledge, and assistance from tax practitioners. The remaining few sections discuss prior literature on the tax knowledge of SMEs, their perceptions of the tax authorities and the use of tax practitioners.

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