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American Interdisciplinary Journal of Business 

and Economics 
ISSN: 2837-1909| Impact Factor : 4.6 

Volume. 9, Number 2; April-June, 2022; 

Published By: Scientific and Academic Development Institute (SADI) 

8933 Willis Ave Los Angeles, California 

https://sadipub.com/Journals/index.php/aijbe 

 

 

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SOCIO-PSYCHOLOGICAL INVESTIGATION OF THE IMPACT OF 

CORRUPTION PERCEPTION ON TAX NONCOMPLIANCE AMONG 

UGANDAN SMES 

 

 

Festo M 

Department of Accounting and Finance, School of Business, College of Business and Management 

Sciences, Makerere University. Kampala 

 

Abstract: This study aims to explore the influence of perceptions of corruption on tax noncompliance 

behavior of small and medium taxpayers in Uganda. The research proposes to fill the gap in the existing 

literature on tax compliance and investigate the impact of perceptions of corruption on self-employed 

managers from a socio-psychological lens. The study will use a sequential mixed-methods approach, 

integrating both qualitative and quantitative methods. Uganda, being one of the most corrupt countries in Sub-

Saharan Africa, is of specific interest for this research. The paper's main research questions focus on the 

relationship between perceptions of corruption, tax fairness, and tax noncompliance behavior among self-

employed taxpayers. The study is significant as it expands the theory of tax morale, identifies the impact of 

perceptions of corruption on tax compliance behavior, and aims to develop an extended and specific 

determinant of Ugandan SMEs' income tax compliance behavior. The study aims to provide an evidence-based 

approach to improve tax compliance behavior in Uganda, which could benefit Uganda Revenue Authority and 

Uganda as a country. 

Keywords: perceptions of corruption, tax noncompliance behavior, small and medium taxpayers, tax morale, 

socio-psychological lens, mixed-methods approach, tax fairness, Uganda 

  

1. Introduction  

This study aims to fill a recognized knowledge gap relating to tax compliance behaviour. It seeks to develop 

a deep understanding of how perceptions of national-level corruption influences tax compliance behaviour, 

and if so, to what extent. And although scholarly works in this area of tax compliance have identified a wider 

range of factors that influence behaviour, little attention has been paid to the influence of perceptions of 

corruption. In particular, what remains unclear is precisely how perceptions of corruption are systematically 

linked to intentional insight into, or fill a gap in, the existing literature in tax compliance behaviour by 

expansively exploring the influence of perceptions of corruption employing micro-level data analysis.  

A comprehensive analysis of small and medium (SME) individual taxpayers’ non-compliance behaviour with 

their tax obligations clearly requires, among others, an examination at both the administrative (i.e. a revenue 

body perspective) and SME (self-employment) levels. However, considering the social psychological models, 



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it is argued that taxpayers’ decisions are the most relevant. This is the side of the question that this study 

attempts to address pragmatically.  

The design and conduct of this study will be built on the adoption of pragmatism as the philosophical research 

framework. This is because perceptions of corruption and tax compliance behaviour are considered as highly 

context-dependent, situational, and socially constructed. Also, the scholarly researches that have 

systematically examined the impact of corruption on tax compliance behaviour are tentative. For these 

reasons, this framework will be applied by integrating both qualitative and quantitative methods. In particular, 

this study will adopt sequential, preliminary-contribution mixed methods, in that the findings of the first phase 

of the qualitative method will inform and develop the second quantitative approach.   

Uganda is of interest for two reasons. First, Uganda appears to be among the most corrupt of the major 

countries in Sub-Saharan Africa (Transparency International 2016, 2018). The Global Competitiveness survey 

report 2019 suggests corruption as the most challenging issue for conducting business in Uganda (World 

Economic Forum). Although Uganda’s tax to GDP ratio has increased from 12 to 15.11 percent (URA, 2019) 

over the last two decades, it remains low compared to other countries in the region (Tusubira, 2018; IMF, 

2011). Besides, the percentage of income tax from SMEs to Uganda’s GDP is below 1 percent (URA, 2018). 

Overall, this evidence might provide a good opportunity to investigate the potential relationship between 

perceptions of corruption and the way SMEs behave.  

Also, tax compliance behaviour is a multi-disciplinary and complex issue with a number of causes. However, 

we are motivated to seek a clearer and deeper understanding of what influences taxpayers’ behaviour in the 

very specific context of Uganda. Particularly, there is notice of a collective perception of pervasive corruption 

in Uganda. Coincidentally, there have been several corruption cases of public interest involving both public 

servants and tax officials in the past ten years (URA, 2018). It’s also clear that tax compliance behaviour may 

not be detached from corruption settings (Alm et al. 2016). Consequently, the fellow is personally enchanted 

to methodically explore the effect of this social phenomenon on taxpayers’ non-compliance behaviour by 

using both theoretical models and data-driven examinations. It’s our belief that an evidence-based approach 

and a better understanding of the implications of this phenomenon will be of great benefit to Uganda Revenue 

Authority and Uganda as a country, which is fraught to enhancing the level of taxpayer compliance. 

Additionally, tax research is relatively new and while it typically has a high framework specificity, most of 

the existing literature in this area is inspired from advanced economies, another reason this study will make a 

contribution.   

Although prior research identifies a number of factors that influence SME taxpayers’ compliance behaviour, 

they are not the focus for this study. Rather, this study aims to deliver more consideration on how perceptions 

of corruption influence tax fairness and intentional tax non-compliance behaviour from a socio-psychological 

lens. The reason for this is that it has been contended that behavioural studies in tax compliance might improve 

tax compliance behaviour (Kornhauser, 2007; Cullis & Lewis, 1997). Thus, if the effects of this variable can 

be understood, it will be possible to establish an extended contextual and specific determinant of Ugandan 

SME income tax’s compliance behaviour in particular, and wider knowledge of tax compliance behaviour in 

general, as well as suitable plans for its treatment. 

1.1 Scope of the study  

There is no single tax compliance theory that is widely accepted. And it has also been recognised that 

determining the factors that influence taxpayer behaviour, whether compliant or non-compliant, is difficult 

(OECD, 2010a, 2014b). Hence, there is a consensus among researchers that no single variable or compliance 



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model is known to exist that is capable of fully explaining tax compliance behaviour on its own (Efebera et 

al. 2004). However, a number of conceptual models with a wide range of variables, have been entwined in an 

attempt to explain taxpayers’ compliance behaviour (Alm, 1999; Jackson & Milliron, 1986). Nonetheless, due 

to the limitation of research resources, to comprehensively include all these inherent factors is certainly 

beyond the scope of this study (OECD, 2010a; Mckerchar, 2010).  

Given the information in the foregoing paragraph, this study will be confined to the compliance behaviour of 

SMEs in the Ugandan context in the informal and formal sectors. In relation to the purpose of the study, it 

will be assumed that perceptions can only be addressed at the individual level (Mendes, 2004) hence the need 

to target owners and managers of these firms. Also, completion of the tax returns is subject to various mental 

processes, including information processing and motivation which influence tax compliance (Antonides & 

Robben, 1995). Second, in order to be able to undertake appropriate modelling, this study will only investigate 

the taxpayers’ compliance behaviour with respect to their annual tax return for the year 2019 and 2020. Tax 

compliance outcomes in this study will focus on OECD’s (2014) classification of expected behaviour namely; 

correctly reporting income in the annual tax return. 

1.2 Research questions  

The main objects of this study can be reflected in three primary research questions:  

a) What is the extent of the relationship between perceptions of corruption and perceptions of tax 

unfairness among the self-employed?  

b) What is the level of the relationship between tax unfairness and tax non-compliance behaviour among 

the self-employed in Uganda?  

c) What is the extent of the relationship between perceptions of corruption and tax non-compliance 

behaviour among the self-employed? 

1.3 Significance and justification  

With the systematic investigation, the findings will explain the relationship between perceived level of 

corruption and tax fairness in Uganda, and the tax non-compliance behaviour of SME taxpayers. The study 

findings will make a contribution to both the theoretical and practical levels. On the theoretical level, this 

study expands the increasingly popular theory of tax morale (Brink & Porcano, 2016; Cummings et al., 2009; 

Frey and Torgler, 2007; Halla, 2012; Jahnke, 2015; Kornhauser, 2007; MacGregor & Wilkinson, 2012; 

McKerchar et al., 2013; Yucedogru & Hasseldine, 2016) by identifying the impact of perceptions of corruption 

have on tax fairness and tax compliance behaviour. Furthermore, because deterrence theory often does not 

work well in practice (Osofsky, 2014), to provide adequate explanation of the dynamic of tax compliance 

behaviour, an extension to the standard model is needed (Ritsatos, 2014).  

Although much is currently known about the determinants of tax compliance, the way by which perceptions 

of corruption influence tax compliance behaviour has not been clearly established. Also, tentative studies have 

distinguished between grand corruption and petty corruption, as well as grand and petty tax corruption. It is 

envisaged that the outcomes of this study will do more than prove perceptions of corruption have an impact 

on tax compliance behaviour, but also will demonstrate how and in what ways these variables affect it. 

2. Theoretical and Review of Literature  

The economic model of tax compliance (Allingham & Sandmo, 1972) emphasises the severity of penalties 

and the prevalence of getting audited (McKerchar & Evans, 2009). This is due to the fact that taxes are 

perceived in most instances as burdensome (Hofmann et al. 2008) which as a consequence results in financial 

or other incentives not to comply. This non-compliance with the tax system leads to loss of tax revenue 



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(Lederman, 2003). Several other strategies have been introduced to cope with the tax compliance within the 

psychological lens like trust in authorities (Kirchler, Hoelzl, & Wahl, 2008), however, non-compliance still 

exists as a core world problem. To make a further contribution, the following questions need to be answered: 

2.1 Perceptions of corruption and tax fairness  

A number of studies (Kirchler et al., 2008; Saad, 2010; Farrar, Donnelly & Dhaliwal, 2013; Kogler, Batrancea, 

Nichita, Pantya, Belianin, & Kirchler, 2013) have attributed tax compliance to the perceptions of tax system 

fairness that taxpayers hold. The authors believe that such a system would allow government to efficiently 

provide public goods and services to the citizenry and for tax authorities to enforce the law through fair 

procedures with impartiality. Thus, a fair tax system would imply that taxpayers can then trust these authorities 

and their morale to pay taxes would improve. In addition, taxpayers are likely to accept governments and tax 

authorities, which legitimises their power of control over them (Gangl, Hofmann & Kirchler, 2015).  

Though, it is desirable to have a fair tax system, sustainability of such a system remains in balance because 

governments and tax authorities fail to pursue transparency and accountability of the public resources as well 

as tax procedures to support smooth tax compliance behaviour (Kirchler, Muehlbacher, Kastlunger, & Wahl, 

2007; Fjeldstad & Tungodden, 2003). Corruption might be one of the most significant factors that affect 

perceptions of tax system fairness as it enhances resource misallocation with no accountability and 

transparency. This makes public spending ineffective for social goals (Hillman, 2004) hence an unfair tax 

system. 

2.2 Perceptions of tax fairness and tax non-compliance behaviour  

Additionally, perceptions of corruption might determine a taxpayer’s intention to report their income as a 

result of perceived tax system unfairness. In fact, high levels of perceived tax system unfairness significantly 

influence intentional tax underreporting behaviour and hence tax evasion (Alm, Martinez-Vazquez & 

McClellan, 2016; Saad, 2010). Under such conditions businesses and individuals may experience lower 

incentive to willingly contribute (Alon & Hageman, 2013). In such cases, fairness is distorted as there isn’t 

fair and respectful treatment of taxpayers in administering taxes as well as the way government allocates 

resources for public expenditure (Kirchler et al., 2008; Feld & Frey, 2007). Corrupt practices by the authorities 

can corrode the ethics of taxpayers, hence destroying the trust which is generally built on the foundation of 

fairness and ethics (Alm & Torgler, 2011). Low trust in the authorities due to tax system unfairness might 

reduce the tax morale and increase the chances of tax evasion. 

2.3 Perceptions of corruption and tax non-compliance behaviour  

There is a widespread perception that corruption creates inefficient tax systems, erodes tax collection 

legitimacy, reduces corporate and personal citizens’ willingness to pay their fair share of taxes. This as a 

result, lowers levels of tax collection (Alm et al. 2016; Tanzi, 2017). At a macro level, Rosid, Evans and Tran-

Nam (2016) indicates that a positive correlation exists between less perceived corruption and higher share of 

tax revenue. This by implication means that high perceptions of corruption are likely to lead to tax 

noncompliance behaviour and lower tax revenue as a result. To overcome this challenge, scholars recommend 

that emerging economies need to prioritise reducing the extent of perceptions of corruption so as to enhance 

tax compliance (Alm et al. 2016; Bird, 2015). Hence, there is need to examine the relationship between 

perceptions of corruption and tax noncompliance behaviour among the self-employed individuals that run the 

SMEs in Uganda. 



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3. Methodology  

3.1 Research design  

Using a conceptual framework to derive the various research questions and testable hypotheses, this study 

will employ a cross-sectional research design using a sequential mixed methods approach (Rosid et al. 2016). 

This is considered more appropriate for studying complex social phenomena such as tax compliance 

behaviour (Devos 2014; McKercher, 2003; Creswell 2007; Bently 2008; Bryman 2008). 

3.2 The population, sample and analysis  

The study population shall be the accessible, experienced SME self-employed individual taxpayers or 

managers within the five regions of the country. This population is considered to be in better position to give 

insightful data and information concerning their compliance with the tax code. The respondents will be 

purposely selected because they interact with the tax system as well as the government service delivery 

system. A sample of 384 self-employed individuals and managers (Krejcie & Morgan, 1970) will be 

considered. Mixed methods approach will be used and data will be analysed using thematic analysis and 

SPSS-AMOS version 25 for SEM. Before data collection, ethical clearance will be sought and consent shall 

be got from every respondent. Utmost confidentiality will be observed. 

4. Dissemination and reporting  

Finding from the study shall be disseminated through progress reports, seminar series, conferences, 

stakeholders’ workshops and journal articles. 

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