MUNHUMUTAPASCHOOL OF COMMERCE

DEPARTMENT OF ACCOUNTING & INFORMATION SYSTEMS

MASTERS IN PROFESSIONAL ACCOUNTING & COPORATE GOVENANCE
APPLIED TAX LAW & PRACTICE (MPAC516)

GROUP ASSIGNMENT PRESENTATION

Group 7

Discuss any seven tax compliance theories and how they can help Zimbabwean tax
authority to improve tax compliance levels. Give examples.

Courage Jombo Reg no. M241027

Tichaona Muronzi Reg no. M240134
Jane Mukukuza Reg no. M241731
Tipedze Taurai Reg no. M201141
Vincent Zvidzai Reg no. M241053
Mberikunashe Locardia Reg no. M210199
Muwira Rosemary Reg no. M240785
Introduction
An article in the Newsday Business Tuesday July 14, 2020, by Fidelity Mhlanga states that
Zimbabwe is experiencing a low tax compliance rate due to “perverse bribery” as citizens and
businesses opt to pay bribes primarily because the cost of compliance is too high.

A report produced by the Zimbabwe Coalition on Debt and Development (Zimcodd) and its
partners titled "Nexus between Debt and Corruption in Zimbabwe's Public Finance
Management” reveals that the poor choose not to comply by paying duties and taxes because
compliance is costly in Zimbabwe. Tax compliance rate in Zimbabwe hovers around 30%,
according to official data.
“Public taxes play a crucial role therefore in aborting a huge dependence on public debt.
However, while tax is a key source of public revenue, Zimbabwe suffers from the challenge
of low tax compliance rate and this is linked to the perverse bribery,” the report, compiled by
Farai Mutondoro states. “Citizens and businesses opt to pay bribes primarily because the cost
of compliance is high monetarily and in terms of ease of obtaining a service. For the public
officials there seems to be a huge affinity for bribes, and this could be blamed on the
extremely low wages,” the report noted.

It also notes that public taxes are an essential element of domestic resource mobilisation, with
contributions of an average of 88,1% of total government revenue between the years 1980 to
1989 and about 89% between 1990 and 1999. According to the 2019 mid-term fiscal review,
taxes constituted 97,8% of the government revenue. The research which was carried out on
50 businesses in the retail sector in small to medium enterprises (SMEs) revealed that the
SMEs evade compliance by paying bribes, keeping two sets of records, relocating to new
premises without notifying authorities, and temporarily closing businesses during compliance
blitz. It is believed that the Zimbabwe Revenue Authority has potential to raise over US$8
billion if it could achieve 100% tax compliance. “Zimra is currently at around 30% tax
compliance. It is important to note that with bribes and low tax compliance potential,” the
report states.

The National Development Strategy 1 (NDS1) aspires and is determined to achieve an

Empowered and Prosperous Upper Middle-Income Society by 2030. The 2030 Agenda for
Sustainable Development, adopted by all United Nations members including Zimbabwe in
2015, created 17 world Sustainable Development Goals (SDGs). They were created with the
aim of "peace and prosperity for people and the planet..." They state that ending poverty and
other deprivations, goes alongside strategies that improve health and education, reduce
inequality, and increase economic growth – while tackling climate change and working to
preserve oceans and forests.
The short titles of the 17 SDGs are: No poverty (SDG 1), Zero hunger (SDG 2), Good health
and well-being (SDG 3), Quality education (SDG 4), Gender equality (SDG 5), Clean water
and sanitation (SDG 6), Affordable and clean energy (SDG 7), Decent work and economic
growth (SDG 8), Industry, innovation and infrastructure (SDG 9), Reduced inequalities (SDG
10), Sustainable cities and communities (SDG 11), Responsible consumption and production
(SDG 12), Climate action (SDG 13), Life below water (SDG 14), Life on land (SDG 15),
Peace, justice, and strong institutions (SDG 16), and Partnerships for the goals (SDG 17).

Despite the ambitious goals set, reports and outcomes indicate a challenging path. Most, if
not all, of the goals are unlikely to be met by 2030, with funding remaining a critical issue.
Significant financial resources required across continents to achieve the SDGs. Zimbabwe
needs to increase tax compliance rate if the NDS1 and SDGs are to be met by 2030 from the
current 30% to 100%.

The Slippery Slope Theory

The slippery slope theory helps in understanding tax compliance. Slippery slope theory is
one of the theories that is used by some researchers to study taxpayer compliance in
recent years. The theory sees the social-psychological variable to be as important as
deterrence variables such as tax inspection tariffs, and tax fine. The theory stated that
social- psychology and deterrence variables have a positive influence on tax compliance.

Social-psychological variables tend to affect voluntary tax compliance, while deterrence

variables tend to affect tax compliance caused by the fear of negative consequences
(enforced tax compliance.
The slippery slope theory also stated that policies that aim to increase voluntary tax
compliance depend on the people’s trust in authorities. Policies such as inspection and
tax fine tend to increase the perception of the power of authorities have to enforce tax
compliance. Based on this slippery slope, people trust gain policies on tax authority
should be prioritized in order to increase voluntary tax compliance.
Based on the slippery slope theory, two main factors that affect taxpayer compliance is the
trust that taxpayer has to tax authority in watching over the tax process . The taxpayer will
voluntarily pay their tax if they really trust the tax process held by the taxpayer without being
affected by tax authority’s power of influence. There will be a high voluntary taxpayer
compliance rate if tax- payer trust is supported by a strict tax inspection.

The group will discuss the seven tax compliance theories and how they can help Zimbabwean
tax authority to improve tax compliance. Compliance theories are psychological and
sociological frameworks that seek to understand why individuals conform to social norms,
rules, and regulations. These compliance theories offer valuable insights into the complex
dynamics of social influence and behaviour change, highlighting the diverse factors that
shape individuals' decisions to conform to societal norms, rules, and expectations. 49.8% of
returns were submitted in 2022. The target was 791 859 and actual was 394 008. Only 75 806
were filed in time resulting in 9.57% compliance compared to 16.61% in 2021.To minimise
existing filling challenges, ZIMRA implemented TARMS.

1) Normative Social Influence Theory

Normative Social Influence Theory: According to this theory, people conform to societal
norms to gain social approval and avoid rejection. This desire to fit in or be accepted by
others motivates individuals to comply with group expectations, even if they do not
personally agree with them. For example, individuals might conform to dress codes in the
workplace to avoid standing out or being criticized by colleagues.

Normative social influence theory is like a secret sauce for tax authorities! By creating a
social norm of tax compliance, taxpayers may feel pressure to conform to this norm, even if
they do not fully agree with it. To tap into this theory, Zimbabwe tax authorities (ZIMRA)
can use the below strategies:

ZIMRA should highlight the benefits of paying taxes, like funding public services and
infrastructure. The authority can make paying taxes seem like a winning lottery ticket by
highlighting the benefits of tax revenue. ZIMRA should show taxpayers how their
contributions fund public services like education, healthcare, and infrastructure and use se
real-life examples of how tax revenue has improved people's lives, like building new schools
or hospitals. There is need to show tax revenue helps build a strong economy by providing
social safety nets and promoting economic growth. The use of visuals like infographics and
videos will make the impact of tax revenue more visible.

ZIMRA should recognize individuals and businesses that pay their taxes on time and in full.
Publicly recognizing individuals and businesses that pay their taxes on time and in full is like
giving a gold star to the tax-paying stars. Tax authorities can create programs that reward
compliance with taxpayer awards where they give out awards for businesses and individuals
who have consistently paid their taxes on time and in full. The authority should publish lists
of taxpayers who have paid their taxes on time and in full, showing them off as model
citizens.

Use of media campaigns to communicate the message that tax compliance is a social
responsibility and a desirable behaviour. The authorities can use the media to highlight
compliant taxpayers, showing the public that paying taxes is a positive thing. This can be
done by Crafting a clear and consistent message that highlights the benefits of paying taxes
for individuals, businesses, and society as a whole. The authority should use a variety of
channels like TV, radio, newspapers, social media, and other media outlets to reach a wide
audience with their message. Local celebrities can be used to create public service
announcements or participate in community events to promote tax compliance.

Education is the key to unlocking compliance. ZIMRA may launch a tax education program
with educational materials, like guides, videos, and workshops, which explain tax laws and
procedures in simple terms. Use social media, websites, and mobile apps to reach a wider
audience with tax education materials. By partnering with local schools, libraries, community
centres, and financial literacy programs to reach people in their community’s tax compliance
can be improved. The educational programs should target specific groups to be effective..

2) Informal Social Influence Theory

This theory suggests that people conform to the actions or opinions of others because they
believe others possess more accurate knowledge or information. When faced with uncertainty
or ambiguity, individuals may look to others for guidance and adopt their behaviours or
beliefs. This type of conformity is more likely in situations where individuals lack expertise
or experience, such as during emergencies or crises.

Informal social influence theory is like a game of follow-the-leader, where people look to
others for guidance on what is normal or acceptable. When it comes to tax compliance, this
means that people might follow the lead of those around them, especially those they trust,
like friends, family, and colleagues. Friends, family members, and colleagues can have a
massive impact on how people think and act, especially when it comes to tax compliance.

Zimra can leverage this social influence by using peer-to-peer outreach programs. The
authority need to work with the local organizations, like community groups and
neighbourhood associations, to create tax compliance programs that are based on social
influence. By targeting influential individuals who are respected in their communities, the
authority can promote tax compliance. ZIMRA has to find people who have a significant
impact on the community, like community leaders, religious figures, and local celebrities
whom they can use to create public service announcements, attend community events, and
talk about the importance of tax compliance.

3) Foot In The Door Technique Theory

This compliance strategy involves making a small request before asking for a larger one.
Once a person agrees to the initial request, they are more likely to comply with subsequent,
larger requests. This technique leverages the principle of consistency, as individuals want to
maintain alignment between their actions and beliefs. For example, a charity might first ask
for a small donation before requesting a larger contribution.

The foot-in-the-door technique is a clever psychological tool that tax authorities can use to
get taxpayers to comply with tax laws. The authority may ask taxpayers to perform a small
action, like attending a tax education workshop or signing up for online tax filing. Once
taxpayers have completed the small action, they are asked to perform a larger action, like
filing their tax returns on time. By gradually increasing the size of the request, taxpayers are
more likely to comply with tax laws.

The authorities should break the tax filing process into smaller, more manageable steps to
make it feel less overwhelming for taxpayers and offer discounts or rewards for electronic
filing, which makes the filing process faster and easier for taxpayers. The use of automated
reminders and digital assistance to guide taxpayers through the tax filing process, makes it
easier to submit their returns on time. Over time, taxpayers will start to see the benefits of
compliance, leading to a shift in their attitude.

Tax authorities in Singapore use automated reminders to encourage taxpayers to file their
returns on time, leading to higher rates of compliance. The U.S. Internal Revenue Service
offers electronic filing incentives, such as faster refunds and reduced errors, encouraging
taxpayers to file their returns online. Tax authorities in Kenya have developed mobile apps
that make tax filing simple.

4) Door In The Face Technique Theory

In contrast to the foot-in-the-door technique, this strategy begins with a large, unreasonable
request that is likely to be rejected. After the initial refusal, a more modest request is
presented, which the individual is more likely to accept in comparison to the initial request.
This technique capitalizes on the principle of reciprocity, as individuals feel compelled to
reciprocate after a concession has been made by the requester. For instance, a salesperson
might first offer an expensive product before suggesting a more reasonably priced alternative.
The door-in-the-face technique is a clever psychological strategy that tax authorities can use
to nudge taxpayers towards compliance. ZIMRA may start by requesting a significant
commitment from taxpayers, like paying a hefty sum of back taxes. After the initial request is
rejected, the authority then lowers the commitment, like offering a payment plan for the back
taxes. The taxpayers is more likely to agree to the second, smaller request after rejecting the
initial, larger one.

Tax authorities can start by making a big ask, like requesting back taxes or tax returns for
multiple years. This can be an effective strategy for taxpayers who have a history of non-
compliance or who owe substantial amounts of back taxes. By reducing the commitment after
a big ask can help tax authorities turn a rejection into a win. Offer taxpayers a payment plan
to pay off back taxes over time, making it more manageable and less daunting. The authority
may also provide opportunities for taxpayers to come forward and pay back taxes with
reduced penalties, encouraging compliance and revenue collection. Taxpayers should be
given the chance to appeal decisions or seek clarification, showing that the tax authority is
fair and open to compromise.

ZIMRA may offer a reduced penalty for back taxes in exchange for disclosing unreported
income and assets.

5) Social Learning Theory

The psychologist Albert Bandura developed the theory. This theory emphasizes the role of
observation and modelling in shaping behaviour. According to social learning theory,
individuals learn by observing the actions and consequences of others and imitating
behaviours that lead to favourable outcomes. This theory highlights the importance of role
models, social reinforcement, and vicarious learning in the process of compliance and
behaviour change.
Social learning theory is like a super glue for tax compliance. Taxpayers observe the
behaviour of others, especially those they admire, and adopt those behaviours as their own.
Taxpayers copy the tax compliance behaviour of others, especially if they see others being
rewarded for their compliance. When taxpayers experience positive reinforcement for their
compliance (like tax refunds or reduced penalties), they are more likely to continue that
behaviour.

ZIMRA can make tax compliance more visible and observable to encourage taxpayers to
follow suit by sharing success stories of taxpayers who have been rewarded for their
compliance, highlighting the positive outcomes. Social media platforms can be used to share
posts, stories, and videos of taxpayers who have received positive outcomes for their tax
compliance.

By publicly acknowledging and celebrating instances of tax compliance the authority can
encourage others to follow suit. Authorities can use both positive and negative reinforcement
to shape taxpayer behaviour. Offering rewards for tax compliance, like tax refunds, reduced
penalties, or public recognition, can encourage taxpayers to repeat the behaviour in the future.
Imposing penalties for non-compliance, like fines or prosecution, can discourage taxpayers
from repeating the behaviour in the future. Severe penalties, like imprisonment, can deter
potential offenders from committing tax evasion or fraud.

6) Cognitive Dissonance Theory

Proposed by psychologist Leon Festinger, cognitive dissonance theory suggests that
individuals experience discomfort when their beliefs or attitudes are inconsistent with their
actions. To reduce this cognitive dissonance, individuals may alter their beliefs, attitudes, or
behaviours to align with one another. Compliance can occur as individuals strive to resolve
this internal conflict and achieve cognitive consistency. For example, a person who initially
disagrees with a company policy may eventually comply with it to reduce the discomfort of
holding conflicting beliefs.

Cognitive dissonance theory is a psychological phenomenon that can be harnessed to nudge

taxpayers towards tax compliance. ZIMRA can use this to their advantage by:
 Highlighting the inconsistency: Point out the discrepancy between taxpayers' beliefs
about tax compliance (e.g., it is a good thing) and their behaviour (e.g., non-
 compliance). Th authority can create campaigns that explicitly point out the mismatch
between taxpayers' stated values and actual behaviour. The authority can share stories
of taxpayers who have realized the inconsistencies in their behaviour and changed
their ways, demonstrating that others have taken the same journey.

 Explaining the impact: ZIMRA can explain how non-compliance goes against their
beliefs and negatively impacts society, increasing the discomfort. Highlight the
negative impacts of non-compliance, such as reduced government revenue, reduced
funding for essential services, and increased costs for honest taxpayers.
 Offering solutions. The authority may offer instalment plans allows taxpayers to pay
their taxes in manageable chunks.

7) Obedience To Authority Theory

This theory, famously demonstrated in Stanley Milgram's obedience experiments, explores
the extent to which individuals comply with commands from authority figures, even when
those commands conflict with their personal moral beliefs or values. Obedience to authority
can be influenced by factors such as the legitimacy and perceived expertise of the authority
figure, as well as situational factors such as proximity and social pressure. This theory sheds
light on the powerful influence of authority on individual behaviour and the potential for
compliance in hierarchical structures.

Obedience to authority theory is a powerful tool that tax authorities can use to encourage
compliance with tax laws. By leveraging the natural tendency of individuals to obey authority
figures, tax authorities can increase the likelihood of compliance and reduce tax evasion.

 Use authority figures: Authority figures, such as government officials or tax

enforcement officers, can be used to communicate the importance of tax compliance
and encourage taxpayers to comply with tax laws. ZIMRA should ensure that their
authority figures, such as enforcement officers and tax auditors, dress in professional
attire that inspires respect and obedience. Authority figures should introduce
themselves using their formal titles and address taxpayers with courtesy titles, like
"Mr." or "Ms.," to convey authority and respect. Lastly, Authority figures should be
well-informed about tax laws and procedures,
 Communicate in authoritative language: Official letters or notices from tax authorities
can be written in a firm but fair manner. Tax authorities can use authoritative
language in their official communications to convey a sense of authority and
command obedience. ZIMRA should use straightforward, unambiguous language in
their official communications to ensure that taxpayers understand the message. The
revenue authority should use official language, such as "must," "required," and
"mandatory," to emphasize the importance of compliance and the consequences of
non-compliance.

Conclusion
As the country strives toward the SDG and NDS1 the revenue authority should ensure
that tax compliance levels have been improved from the current 30% to 100% by
using technology to their advantage. The below technological strategies may be
employed:

1. Making it easier to pay: Making use of online and mobile payment options make
paying taxes a breeze, reducing the chance of mistakes and encouraging compliance.

2. Data analysis: Tax authorities can use data analysis to spot patterns of non-
compliance, predict tax evasion, and target enforcement efforts more effectively.

3. Reducing red tape: Automated systems for tax filing and payment simplify the
process, reducing the time and effort required for compliance and improving
taxpayers' satisfaction.

Whilst technology will improve compliance, Zimra should continue enforcing

compliance by imposing:

 Strong penalties: Harsher penalties for tax evasion, like fines and jail time, can make
people think twice before breaking the rules.

 Better detection: Using data analysis and other tech tools, tax authorities can catch tax
evaders more effectively and send a clear message that tax evasion will not be
tolerated.
  Automated filing and payment: Automatic tax filing and payment systems make it
harder for people to dodge their tax obligations.

 Consistency: Enforcing tax laws consistently across all sectors.

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