Analysis of Procedural and Retributive Justice in Tax Compliance

Abstract

To  date, tax research has tended to focus on tax penalties rather than their retributive justices and procedural justices of systems imposing tax penalties. This article focuses on retributive justices and procedural justice in tax compliance literature. The article examines whether or not charging corporate income tax penalties, which are perceived retributively justice encourage tax
compliance. Also it investigates whether or not implementing procedural justice in imposing corporate income tax penalties increases compliance and moderates the relationship between tax compliance and retributive justice. Data were collected using survey method to solicit responses from 257 Small and Medium Enterprises [SMEs] taxpayers in Tanzania about their perceptions over retributive justice of corporate income tax penalties for not keeping complete records as well as paying taxes on time, and likely impacts of the penalties on tax compliance. Also the survey collected data on respondents’ perception on procedural justice in the process of imposing tax penalties. Results from the study revealed that both perception on retributive and procedural justices are significanly positively correlated with tax compliance.Also the perception on procedural justice might moderate
the association between retributive justice and tax compliance. The retributive and procedural justices fared significant better in
increasing tax compliance and the procedural justices have a moderation effect on the relationship between tax compliance and
retributive justice. Therefore, it is recommended that tax authorities should strive to improve retributive justice perception on their tax penalties and procedural justice of systems involved in delivering tax penalties.