Article

Tax Perception and Tax Evasion IIM Kozhikode Society & Management Review
6(2) 1–12
© 2017 Indian Institute
of Management Kozhikode
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/2277975217701363
http://ksm.sagepub.com

Rajat Deb1
Sourav Chakraborty2

Abstract
The study attempts to report the factors that are responsible for people’s perceptions about taxation, in general, and
tax evasion, in particular. The study frames a model, based on which research hypotheses are derived. Adopting cross-
sectional research design, a survey was carried out on a sample of 125 respondents. A pre-test was also carried out
to test the reliability and validity of the interview-schedule before the actual survey was executed. Factor analysis was
applied for data reduction. Results of inferential statistics show the influence of selective demographics on tax percep-
tion and tax evasion, with other factors such as provisions for penalty and prosecution and rates of tax also influencing
the taxpayers’ decisions. While acknowledging a few shortcomings, the relevance of the study in policy-making has been
enumerated. In conclusion, a road map for further studies has been indicated.

Key words:
Tax evasion, survey, descriptive statistics, inferential statistics.

Introduction
Tax has been defined as a form of compulsory payment
charged by the government without any direct benefits to
the payee (Song & Yarbrough, 1978). Even though more
often than not people try to avoid paying taxes, taxes are
inevitable (Epstein & Gang, 2010). In the past decade, the
ethical values and moral standards in India has been at their
lowest, visible in a series of scams, frauds and tax evasions
in business and government organizations. Literature has
validated the paradoxes between ethics, morality and such
tax evasions (Alm & Torgler, 2011; Doyle, Frecknall-
Hughes, & Glaister, 2009; Maciejovsky, Schwarzenberger,
& Kirchler, 2012; McGee, 2006; McGee, Ho, & Li, 2008;
Molero & Puyol, 2012; Yetmar & Eastman, 2000).
Multi-dimensional studies on taxation have been con-
ducted and reported in the literature; for instance, tax
avoidance (Payne & Raiborn, 2001), tax evasion and tax
compliance behaviour (Fallan, 1999; Fallan & Eriksen,
1993; Jackson & Milliron, 1986), tax rates (Hashimzade,
Myles, & Nam, 2012), tax planning (Kaplan, Eyal, &
Dover, 2007) and optimal taxation (Sandmo, 2012). There
are studies that have attempted to analyze social norms
(Bordignon, 1993; Erard & Feinstein, 1994; Gordon, 1989;
Schnellenbach, 2002), tax evasion behaviour and ethical
impressions (Yetmar & Eastman, 2000), morale on tax
(Molero & Puyol, 2012), tax evasion and ethical issues
(McGee et al., 2008), inattention to tax evasion ethics
(McGee, 2006), application of utility theory by the tax
evaders (Alm & Torgler, 2011; Maciejovsky et al., 2012)
and the psychographic factors behind such tax evasions
(Fallan, 1999; Ghosh & Crain, 1995; Maciejovsky et al.,
2012; Trivedi, Shehata, & Lynn, 2003).

1
Assistant Professor, Department of Commerce, Tripura University, West Tripura, Tripura, India.
2
Assistant Grade, Tripura State Cooperative Bank Ltd, Udaipur Branch, Udaipur, Gomati Tripura, Tripura, India.

Corresponding author:
Rajat Deb, Assistant Professor, Department of Commerce, Tripura University, Suryamaninagar-799022, West Tripura, Tripura, India.
E-mail: rajatdeb@tripurauniv.in
2 IIM Kozhikode Society & Management Review 6(2)
In the Indian context, different studies on taxation have
variously covered the Indian tax system and the challenges
it faces (Kumat, 2014); for example, ratios of personal and
corporate income tax to gross domestic product (GDP;
Reddy & George, 2013); trends of tax resilience during,
before and after the liberalization (Suresh & Khan, 2011);
ethics on tax evasions by university students (McGee &
Jain, 2011); the association between growth in GDP and
tax revenues (Srivastava, Sharma, & Bhatnagar, 2010);
accessing income tax e-filing service by young professionals
(Ojha, Sahu, & Gupta, 2009); discriminatory tax provisions
(Bandgar, 2007); corporate tax analysis (Jain & Soni,
2004); direct tax reforms (Sidhu, 2003); structural changes
in tax system and its influence on government exchequer
(Das-Gupta & Gang, 2000); acceptance of bribes by tax
auditors (Besley & McLaren, 1993; Chander & Wilde,
1992; Mohammad & Whalley, 1984; Tanzi, 1980; Wahlund,
1992); tax evasions by business houses (Becker, 1992;
Cheung, 1992; Coase, 1992); impact of tax incentives on
savings (Das-Gupta, 1989); and impact of government
policy on tax collections (Choudhury, Rastogi, & Chand,
1975). There have been several studies on taxation but the
literature is scant in perceptional studies on issues such as
tax evasion. The present study attempts to contribute in
that area. Tax evasion studies are generally divided into
three categories: theoretical models, surveys and analyses
using official data (Cebula, 1997). The present study adopts
the survey method and reviews the survey instruments
designed to analyze the tax evasion perceptions (McGee,
2011; McGee et al., 2008). The scope of the present study
is confined to the randomly chosen respondents of Agartala
city, the capital of Tripura, a northeastern state of India.
The study contributes to the literature in four ways.
First, the results of this study validate the findings of some
of the previous studies, such as the significant impact of
gender in tax perception and tax evasion attitudes (Fallan,
1999; Gupta & McGee, 2010; McGee & Guo, 2007;
McGee & Lingle, 2008; McGee & Bose, 2009; Spicer &
Hero, 1985; Tittle, 1980), but differs from some other
studies which have reported no such significance of gender
in the ethical perceptions of the respondents (Babakus,
Cornwell, Mitchell. & Schlegelmilch, 2004; Callan, 1992;
Roxas & Stoneback, 2004). Second, like earlier studies, the
present study also reports the significant impact of non-
gender demographics on the tax perception and tax evasion,
such as level of education (Fallan, 1999), occupation
(Lewis, 1982) and marital status of the respondents (Caputo
& Dolinsky, 1998). Third, previous studies document that
penalty and prosecution as well as tax rates influence tax
evasion (Arsić, Arandarenko, Radulovic, Ranđelovic, &
Jankovic, 2015; Graetz & Wilde, 1985; Pommerehne &
Frey, 1992; Skinner & Slemrod, 1985) and the present
study confirms this. Fourth, literature has validated that tax
perception influences tax evasion (Zaklan, Westerhoff, &
Stauffer, 2009) and the present study arrives at the same
conclusion.
The study attempts to ascertain the respondents’ tax
perception and tax evasion attitude and, additionally, the
determinants for such an attitude.
The structure of the rest of the article is as follows: first
it presents the review of previous studies, theoretical
framework and the development of hypotheses; the rese-
arch methodology is provided next; then it moves on to
discuss the results of the present study and, eventually,
provides the conclusions.
Settings
The study thoroughly reviews the available literature on
taxation and tax evasion to build a conceptual model
incorporating research hypotheses and their null forms are
deduced.
Gender and Taxation
Literature has validated the significance of gender in the
determination of ethical behaviour, with a clear evidence
of more ethical attitudes on the part of women in tax
perceptions (Aitken & Bonneville, 1980; Fallan, 1999;
Tittle, 1980) in the course of conducting different
experiments on tax-related matters (Baldry, 1987; Spicer &
Becker, 1980; Spicer & Hero, 1985). Women are found to
be more honest taxpayers (Tittle, 1980), doing business
ethically (Ruegger & King, 1992) and having better tax
compliance than men (Dollar, Raymond, & Roberta, 2001;
Gottfredson & Hirschi, 1990; Junger, 1994; Mocan, 2004;
Swamy, Knack, Lee, & Azfar, 2001; Torgler & Valev,
2004; Tittle, 1980). As far as tax evasions are concerned,
literature points out women are engaged in less tax evasion
practice in comparison to men (Gupta & McGee, 2010;
McGee & Bose, 2009; McGee & Guo, 2007; McGee &
Lingle, 2008; McGee, Nickerson, & Fees, 2006). This
leads to the following hypotheses:
H01: Gender does not influence tax perception.
HA1: Gender influences tax perception.
Non-gender Demographics and Taxation
Literature indicates significant influence of non-gender
demographics on taxation behaviour, such as positive
Deb and Chakraborty 3
correlation between age and tax morale (Torgler &
Schneider, 2005), negative correlation with breaking of tax
rules (Gottfredson & Hirschi, 1990; Hirschi & Gottfredson,
1983; Torgler & Valev, 2004), evidence of higher tax
compliance costs borne by the self-employed in contrast to
those who are employed (Lewis, 1982), having a lower tax
morale (Torgler & Schneider, 2005) and positive correlation
of tax knowledge with education level (Fallan, 1999). Based
on these, the following hypotheses are formed:
H02: 
Non-gender demographics do not influence tax
perception.
HA2: Non-gender demographics influence tax perception.
Tax Perception and Tax Evasion
Tax perception and tax evasion are studied since long and
the literature has covered aspects such as tax morale (Alm,
McClelland, & Schulze, 1992), trust (LaPorta, Lopez-de-
Silanes, Shleifer, & Vishny, 1997; Sanyal, Gang, &
Goswami, 1996), moral intensity (Frey, 2000; Jones, 1991;
Morris & McDonald, 1995), motivation crowding theory
(Frey & Jegen, 2001), model of tax payer’s decision to
evade tax or not (Allingham & Sandmo, 1972), tax payers’
rational judgements diversion (Kahneman, Kuctsch, &
Thaler, 1986) and the prospect theory (Kahneman &
Tversky, 1979). On the basis of these, the following
hypotheses are formed:
H03: Tax perception does not influence tax evasion.
HA3: Tax perception influences tax evasion.
Provisions for Penalty and Prosecution and Tax
Evasion
Literature shows that provisions of penalty and prosecutions
influence tax evasion significantly. Lower probability of
detection and provision for negligible fine in many
countries lead to tax evasions (Graetz & Wilde, 1985;
Pommerehne & Frey, 1992; Skinner & Slemrod, 1985).
Tax evaders compare the probable consequences before the
evasion (Zaklan et al., 2009). Thus, a negative association
is found between the rate of fine and instances of tax
evasions (Feld & Frey, 2007). This gives the following
hypotheses:
H04: 
Provisions for penalty and prosecution do not
influence tax evasion.
HA4: Provisions for penalty and prosecution influence
tax evasion.
Tax Rates and Tax Evasion
Tax evasion has a positive correlation with the prevailing
tax rates, that is, relatively higher personal income tax rates
play a catalytic role in more tax evasion cases (Connelly,
1998). Literature shows the association of quantum of tax
burden with tax evasion instances (Arsić et al., 2015). In
contrast, tax compliance rates significantly increase when
tax rates are cut to marginal levels (Kamdar, 1997). Hence,
the following hypotheses are formed:
H05: Tax rates do not influence tax evasion.
HA5: Tax rates influence tax evasion.
In Figure 1, a conceptual model is formed and hypotheses
are deduced.
Research paradigms adopted to execute the study—the
overall worldviews of the research problem—are presented
in Figure 2.
Methodology
Research methodology refers to the overall approach for
conducting a study, which largely depends on ontology
and epistemology, and incorporates therein the research
methods, that is, the specific technique adopted for data
collection and analysis pertinent to the research problem.
Research Design
Adopting the cross-sectional research design, this study
was executed in January–May 2016. The survey method
was adopted to assess the respondents’ tax perception, in
general, and tax evasion, in particular, to gather the
quantifying details and to estimate the studied population
(Fisher, 2007; Groves, Fowler, Couper, Lepkowski, Singer,
& Tourangeau, 2004; Malhotra, 2010; McDaniel & Gates,
2010; Pinsonneault & Kenneth, 1993).
Methods
Schedule Development
The study used a self-administered interview-schedule for
data collection, since related literature indicates that there
4 IIM Kozhikode Society & Management Review 6(2)
Figure 1.  Conceptual Model of Tax Perception and Tax Evasion
Source: Authors.
Figure 2.  Research Paradigms of Tax Perception and Tax Evasion
Source: Authors.
is a tendency amongst the prospective respondents to shun
the questions addressing the issues of personal finances
including taxation (e.g., Churchill, 2001; Malhotra, 2010).
The items of the schedule were framed adopting the
following steps:
First, the digital library of an Indian central university,
having about 150 relevant research articles with full text
published in different academic e-journals, was accessed
using key words such as personal taxation, tax evasion,
tax compliance, gender and taxation and tax rates. A
comprehensive review of the same helped in produ-
cing an interview-schedule to conduct a pretest with 55
items in it.
Second, a pilot study was conducted on 25 randomly
selected sample participants to test the items of the
interview-schedule in accordance with the features of
clarity, parsimony and coherence advocated by Zikmund
and Babin (2012). The pilot study reduced the items to 50
by excluding the items which scored below .5. The
Cronbach’s alpha values were computed as follows:
.682, .690, .696, .665, .476, .654, .680, .699, .687, .654,
.690, .444, .726, .611, .703, .654, .715, .379, .676, .490,
.683, .387, .670, .660, .672, .709, .653, .660, .670, .697,
.666, .591, .688, .688, .655.
Finally, the survey was conducted by a researcher-cum-
enumerator and an attempt was made to strike a balance
between the two extreme points—the number of items and
the response rate, as suggested by Dillman (1978).
Sampling Design
The study was carried out in the city of Agartala and all
citizens aged 18 years and above were assumed to be the
study population of which 125 sample respondents were
randomly selected. The exact number of the study popu-
lation is unknown. Hence, having an infinite population
with no access to contact details, the study has not been
able to set the sampling frame. The enumerator approached
each and every respondent in the sample, with prior
approval from the Department of Commerce of the
university to voluntarily participate in the present study.
Deb and Chakraborty 5
The interviews were conducted on weekdays as well as
during the weekends. On the weekdays, the in-service
respondents were interviewed at their workplaces, while
the rest were interviewed during weekends. The sample
size for the study is based on the results of a few social
science studies (Tabachnick & Fidell, 2013; Roscoe, 1975)
and is fixed within the threshold of 30 and 500.
Data Collection Design
Primary Data
As advised by Dillman (1978), the study included a cover
letter containing brief objectives of the study and instruc-
tions for the respondents to fill in the schedule. The
enumerator initially tried to build a rapport with the
prospective respondents and then the respondents were
briefed about the purposes of the study with an intention to
bring out their true response. The relevance of this process
has been recommended by several authors (e.g., Oberhofer
& Dieplinger, 2014). A 5-point Likert scale with score
options starting from strongly disagree (1) to strongly agree
(5) was used, which later facilitated in coding, tabulating
and interpreting the data, as evident in literature (Hair, 2010;
McDaniel & Gates, 2010). The participants were assured of
their anonymity with a request for seeking clarification
about doubts, if any, while filling the items of the interview-
schedule (Jobber, 1985; Oppenheim, 1992). The enumerator
translated the meaning of the items into vernacular language
(i.e., Bengali) to mitigate the risk of ambiguity, if necessary
(Peytchev, Conrad, Couper, & Tourangeau, 2010).
Secondary Data
● Primary Sources: Articles in contemporary aca-
demic e-journals, conference proceedings, govern-
ment publications and books were consulted.
● Secondary Sources: Review articles in academic
e-journals, business newspapers, database and dif-
ferent Websites were explored.
● Tertiary Sources: Indexes, abstracts and citation
indexes were duly reviewed.
Variables
The parameters of the study were classified as (a) predictors
(incorporating selective demographics, tax perception,
provisions for penalty and prosecution and tax rates); (b)
outcome (tax perception and tax evasion) and (c) confoun-
ding (influence of referral group members). To test H01 and
H02, the study assumed selective demographics as predictors
(independent variables) and tax perception as outcome
(dependent variable); to test H03, H04 and H05, tax perception,
Table 1.  Variables (Parameters) of the Study
Predictors Outcome Confounding
Gender Tax perception Referral group
members’ influence
Non-gender
Tax perception Tax evasion
Provisions for penalty
and prosecution
Tax rates
Source: Authors.
provisions for penalty and prosecution, tax rates were
assumed as predictors and tax evasion as the outcome (see
Table 1). Since the study is a perceptional one, the
confounding variables (the influence of referral group
members), which could impact the predictor–outcome
relationships, were controlled.
Significance Level
The confidence level was presumed as 95 per cent, that is,
the significance level (α) was fixed at 5 per cent.
Choice of Tests
In the study, different statistical tests were applied on
randomly collected samples to estimate the likely behaviour
of the study population. The selection of statistical techni-
ques to test the null hypotheses depended on the objectives
of those tests, such as types of data, sample size and other
assumptions, which have been briefly summarized in
Tables 2 and 3.
Data Analysis Strategy
For data analysis, the IBM–Statistical Package for Social
Sciences (SPSS-20) was used. The interview-schedule
items were analyzed with sample statistics (percentage,
modes, means and standard deviations) and inferential
statistics (Pearson’s correlation analysis, cross tabulation
and one-way ANOVA). To cluster the items into few
relevant factors, the study applied factor analysis, a
significant technique for data reduction (Ho, 2006;
Mitchelmore & Rowley, 2013). More specifically, principal
component analysis (PCA) was used.
Instruments Validation
The validities of the study such as internal (research
outcome), construct (ability of the items to assess the
6 IIM Kozhikode Society & Management Review 6(2)

Table 2.  Objectives for Using Inferential Statistics

Variables Null
Tests Measurement Predictors No. Outcome No. Purposes hypotheses
Pearson’s Interval Gender 1 Tax 1 To measure the relationship H01
correlation perception between two variables–predictor
and an outcome
Cross Nominal Non-gender 5 Tax 1 To assess the association among H02
tabulation (categorical) demographics perception two or more parameters
Factorial Interval Tax perception, 3 Tax 1 To understand the interaction H03, H04, H05
(repeated- provisions for penalty and evasion effect between three predictors
measures) prosecution, tax rates on a continuous outcome
ANOVA
Source: Authors.

Table 3.  Assumptions behind Statistical Tests

Tests Type Assumptions hold

Pearson’s correlation
Cross tabulation
One-way ANOVA
Source: Authors
Parametric Interval data, linearly related, sample size (n)>30, sampling distribution is
bivariate and normally distributed.
Joint probability distribution Random sample, independent observations, mutually exclusive row and
column variable categories that include all observations, large expected
frequencies.
Parametric Outcome has been measured on continuous level (interval data), three
predictors each consisting more than two categorical independent
groups, no significant outliers, independent groups linearly related,
homogeneity of variances, i.e., the equality of variances of the differences
between measurements hold, sampling distribution is normally
distributed and sample size (n)>30.

research hypotheses), content (ability to cover research
questions), concurrent (significant research findings
correlated with literature) and conclusion (statistical
evidence to prove generalizations) were tested. The internal
validity threats were managed by choosing the respondents
randomly (selection threat), separately (diffusion treatment
threat) and rationally (regression threat). The external
validity threats were countered by confining the generalized
results exclusively within the samples of the study.
Results
Descriptive Statistics
Different sample statistics like modes (for Nominal scale),
means and standard deviations (for Interval scale) have
been used to summarize the raw data. The study reports
that the majority of the respondents are men (68%), 36–45
years old (31.2%), married (61.6%), educated up to the
graduation level (40%), belong to general caste (70.4%),
service holders (47.2%), earn INR 0.030–0.050 million per
month (30.4%), Hindus (75.2%), have PAN cards (80%),
file income tax returns regularly (60.8%) and do not face
any type of harassment while paying tax (90.2%).
With respect to the factor ‘nature of income tax’, mean
values were calculated as: Average Mean = 3.83; standard
deviation (SD) =.84. Mean scores for the items clubbed in
for this factor range from 4.21 to 3.73, excluding the reverse
score item ‘tax ethics and the fairness of the tax system’.
With regard to the factor ‘attitudes and tax compliance’,
mean values are: Average Mean = 3.90; SD =.87. Mean
scores ranged from 4.32 to 3.77, excluding the reverse score
item ‘size of underground economy and income tax rate’.
The mean values of the factor ‘determinants of tax evasion’
are reported as: Average Mean = 4.02, SD =.91. Mean
scores are in a range from 4.22 to 3.89. With respect to the
factor ‘ill effects of tax evasion’, reported mean values are:
Average Mean = 4.07, SD = .80. Mean scores for the items
clubbed in for this factor range from 4.64 to 3.78, excluding
the reverse score item ‘adverse impact of referral groups’.
The mean values of the factor ‘taxation literacy’ are
computed as: Average Mean = 3.94, SD = .94. Mean scores
for items have ranged from 4.14 to 3.99, excluding reverse
score item ‘increase in knowledge of taxation’.
Deb and Chakraborty 7

Factor Analysis Pearson’s Correlation Analysis

The Pearson’s correlation analysis (Table 5) between
Participants of the study replied to a 30-items schedule
predictor and outcome shows a significant relationship
(Likert type) about their tax perceptions and tax evasion
tendency. The reliability of the items of the schedule, (r = .0128, p < .05) and provides the basis to reject H01. The
verified by using Cronbach’s alpha, stands at .861. Factor study concludes that gender likely has an influence on tax
analysis has been applied to test the degree of consistency perceptions.
amongst the different measurements of a parameter (Hair, Cross Tabulations
2010). The measure of sampling adequacy (MSA) was
Cross Tabulations and Chi-square test were applied to test
computed using the Kaiser–Mayer–Olkin (KMO) tech-
the association between non-gender demographics and the
nique, which produced the result of .78, above the threshold
respondents’ tax perceptions. The outcome is as follows:
limit of 0.6, favorable to apply factor analysis (Kaiser &
The age of the respondents and their tax perceptions are
Rice, 1974). The Bartlett Test of Sphericity was applied to
positively correlated, that is, respondents’ tax perception
test the overall significance of correlation metrics (approx.
level increases as they become older. Increasing respon-
Chi square = 1432.764 and significance at .000) and it
sibilities on the family side make them responsible towards
supported the dataset validity. Literature validates that
the society and they contribute to it by paying taxes. The
having a small value, less than .05, brings statistical
Chi-square value was computed as 24.74 and the likelihood
significance (e.g., Kline, 1994). Significant Eigen values
ratio as 32.475. The significance value was computed as
of 1 or above have only been retained for deciding the
.002 ( p < .05), which is enough evidence to reject H02.
number of factors of the study, as advised by some
The respondents’ education level and their tax percep-
researchers (e.g., Ho, 2006).
tions have significant positive correlation. The Chi-square
Table 4 shows that the PCA method has produced five
value stood at 31.55 with likelihood ratio as 33.445.
factors having Eigen values 1 and above explaining
The statistically significant value was computed as .000
approximately 80.82 per cent of the total variables, which
( p < .05), which supports the rejection of H02. It is an indi-
satisfies the representative criteria of the dataset (Pett,
cation that tax perception increases with education levels.
Lackey, & Sullivan, 2003).
The respondents’ occupation and their tax perceptions
level have an association pointing that service holders
Inferential Statistics usually pay their taxes on a regular basis and relatively
Inferential Statistics imply the numerical techniques used there are fewer defaulters. The Chi-square value was
on the randomly drawn samples for drawing inferences 30.874 and the likelihood ratio was 32.741, with the
about the study population. significance value of .000 ( p < .05). This has provided

Table 4.  Extracted Factors from PCA

(Factors: Nature of income tax, tax attitudes and compliance, tax evasion
determinants, ill effects of tax evasion and taxation literacy)
Initial Eigen values Extraction sums of squared loadings Rotation sums of squared loading
% of Cumulative % of Cumulative % of Cumulative
Components Total variance % Total variance % Total variance %
1 6.125 29.12 29.12 6.012 29.12 29.12 5.982 24.11 24.11
2 5.117 20.71 49.83 5.045 20.71 49.83 4.775 21.70 44.81
3 3.413 14.18 64.01 3.091 14.18 64.01 3.544 13.37 58.18
4 2.431 10.83 74.84 2.188 10.83 74.84 1.806 6.15 64.33
5 1.116 5.78 80.62 1.009 5.78 80.62 1.002 4.22 68.55
Source:  Based on authors’ calculations.
Note:   Extraction Method—Principal Component Analysis (PCA).

Table 5.  Correlations of Gender with Tax Perception*

Predictor Outcome Correlation Value (r)

Gender Tax perception .0128*
Source: Based on authors’ calculations.
Note: *p < .05.
8 IIM Kozhikode Society & Management Review 6(2)

the basis for rejecting H02. Thus, occupation has an
influence in tax perceptions.
The respondents’ marital status and their tax perception
levels have a positive association, that is, their tax
perception increases after marriage. The calculated Chi-
square value was 32.158 and the likelihood ratio was
33.328. The significance value of .000 ( p < .05) indicates a
significant association between the variables and the
rejection of H02.
The respondents’ income level and their tax perception
levels are positively correlated. The Chi-square value was
37.105 and the likelihood ratio was 41.624. The significance
value of .000 ( p < .05) indicates a significant association
between the parameters, leading to the rejection of H02.
The summary results of cross tabulations are presented in
Table 6.
One-way ANOVA
To test H03, H04 and H05, the study applied one-way ANOVA
(explaining the variability of values around the grand mean
of all values), as the same respondents have answered three
different questions related to the same outcome. The study
has assumed that the relationship between pairs of experi-
mental conditions is similar. The statistical technique ass-
essed the effect of three predictors (tax perceptions,
provisions for penalty and prosecution, and tax rates) on a
continuous outcome (tax evasion).
In Table 7, the ANOVA output has been exhibited. The
critical value of F for d. f. (v1= 2, v2= 372), α = 5 per cent.
Since the calculated F >tabulated F, it has statistical
significance. Thus, the study concludes that tax perception,
provisions for penalty and prosecution and tax rates
significantly affect the tendency to tax evasion and provides
the evidence to reject H03, H04 and H05. In other words, the
study is likely to accept HA3, HA4 and HA5.
Discussion
Five factors having Eigen values of 1 and above were
deduced with the help of factor analysis, which measured
the items for tax perception and tax evasion decisions.
Table 8 presents the summary of the factor analysis and
descriptive statistics.
The five null hypotheses, formulated for the study, were
tested with different parametric tests and accordingly
inferences were drawn. Cross tabulations have provided
statistically significant evidence for the rejection of H01,
which means that gender has an influence on tax perception
and tax evasion decisions. The association between non-
gender demographics and tax perception was tested by
applying Pearson’s correlation and the results have a
statistical significance, thus rejecting H02. To know the
relationships among the predictors—tax perception,
provisions for penalty and prosecution and tax rates—with
the outcome tax evasions, H03, H04 and H05 were tested by
using one-way ANOVA and the results indicate statistically
significant association among the parameters, thus rejecting
H03, H04 and H05.

Table 6.  Summary Results of Cross Tabulations

Variables Results
Non-gender demographics Tax perceptions Pearson
(predictors) (outcome) Chi-square value Likelihood ratio Significance value*
Age Tax perceptions 24.74 32.475 .000
Level of education Tax perceptions 31.55 33.445 .000
Occupation Tax perceptions 30.874 32.741 .000
Marital status Tax perceptions 32.158 33.328 .000
Level of income Tax perceptions 37.105 41.624 .000
Source:   Authors’ calculations.
Note:  *p < .05.

Table 7.  ANOVA Table

Sum of squares Mean SS

Sources of variation d. f. (SS) (SS/d. f.) Variance ratio (F)
Between samples 3–1=2 250 125 125/12.93=9.66
Within samples 374–2=372 4812.18 12.93
Total 375–1=374 5062.18 –
Source: Authors’ calculations.
Deb and Chakraborty 9
Table 8.  Summary Results of Factor Analysis and Descriptive
Statistics
No. of Cronbach’s
No. Factors items Alpha Mean SD
1 Nature of 6 .88 3.83 .84
income tax
2 Attitudes and 8 .84 3.90 .87
tax compliance
3 Determinants of 4 .79 4.02 .91
tax evasion
4 Ill effects of tax 8 .69 4.07 .80
evasion
5 Taxation literacy 4 .72 3.94 .94
Source:   Authors.
Conclusion
The study is an attempt to understand the factors that
influence tax perception and tax evasion of the respondents
of a case study. A review of prior studies helped in creating
a model, on the basis of which five research hypotheses
were formulated along with their null forms. Accordingly,
the items of the interview-schedule were also set. A cross-
sectional research design was adopted and a survey was
conducted on 125 randomly selected respondents, who
provided their views on tax perception and tax evasion.
The data collected was then processed through IBM SPSS-
20. The interview-schedule also passed through a pilot
study before the final survey was undertaken. Moreover,
the reliability and sample adequacy tests were also
performed. Factor analysis helped in deducing five factors,
namely, nature of income tax, attitudes and tax compliance,
determinants of tax evasion, ill effects of tax evasion
and tax literacy. The output of parametric tests provided
evidence to reject all the null hypotheses, which means that
the study accepts the alternative hypotheses.
Kalyanaraman (2016), quoting the BofA Merrill Lynch
Global Research Report has stated that a lion’s share of
income declarations under the Income Disclosures Schemes
(IDS), 2016, launched by Government of India, are
involuntary. This may be due to reasons such as high tax
rates, fear of harassments, perception of the evaders towards
non-detection and expectations for announcement of similar
schemes in future, as if like an amnesty (Kalyanaraman,
2016). To minimize the quantum of tax evasions, government
may use data analytics on high valued transactions. It may
also accept the recommendations made by Justice M.B.
Shah committee, such as prohibiting cash transactions
exceeding INR 0.3 million and putting a ceiling on holding
cash up to INR 1.5 million. Moreover, proper coordination
between authorities, phase-wise transition to a cashless
economy by abolishing high-denomination currency of
INR 1,000, reforms in electoral financing, check-and-
balance in property registration to curb undervaluation are a
few proposed ways. Besides, tax targets should be fixed
after detailed statistical analysis, covering the nature and
volume of transactions instead of fixed money value target
per geographical area. Ambiguities in the interpretations,
along with retrospective amendments in tax laws, should be
avoided. The fallacy in the minds of taxpayers about the
government, bureaucracy and tax administration need to be
eliminated by arranging tax awareness programmes. In
future, the proposed Tax Policy Council (TPC) and Tax
Policy Research Unit (TPRU) may come out with robust
solutions to address tax evasion issues.
A few caveats need to be considered before making a
wider generalization of the research output. First, the
sample respondents may not be representative of all
citizens of the city under study. Second, instead of adopting
or adapting to any established questionnaire, the present
study has developed a self-administered interview-schedule
for executing the survey. Third, the factors influencing tax
perception and tax evasion have only been considered as
the parameters, strictly following the objectives of the
study. Fourth, the sampling technique, sample size, study
area and the study period were confined to a small scale
due to time and resource constraints. Fifth, the statistical
techniques used for data analysis have their own limitations,
which might have influenced the final inferences. Finally,
the input from the respondents might not be free from bias,
which may have direct bearing on the conclusions of the
study.
The outcomes of the study show that demographics
significantly influence the tax perception which, in turn,
influence tax evasion. The latter is also influenced by tax
rates and provisions for penalty and prosecutions. The
study also concludes that gender has a significant impact
on tax perceptions. This emphasizes the fact that tax
authorities should take appropriate measures to increase
tax awareness among women, which, in turn, may reduce
tax evasion. Moreover, income and education levels have a
positive correlation with tax perception, which may be
used by tax authorities for chalking out tax awareness
programmes in order to increase tax bases as well as
minimize tax collection costs. It is also worth noting that
relevant literature documents that attendance in tax
awareness programmes reduces tax evasion (Eriksen &
Fallan, 1996; Lewis, 1982). The results show that tax rates
and provisions for penalty and prosecutions significantly
impact tax evasion. Thus, to reduce the number of instances
of tax evasion, tax authorities may change their strategies
by reducing tax rates to the extent possible and by amending
or enacting stringent penalty and prosecution provisions.
10 IIM Kozhikode Society & Management Review 6(2)
Future studies may attempt to increase the sample size
by covering all the districts of the state. Comparative
multidimensional tax perception studies between men and
women and across cities, districts and states may also be
carried out. Studies may be attempted to verify some other
important factors, such as religion, values, caste system,
traditions and morality. Studies can also be conducted by
considering factors such as impact of financial literacy, with
special reference to tax literacy, on cause-and-effect analysis
of tax evasion, which may also incorporate the types of
taxes and studies between different variants of indirect
taxes. Future research may also be conducted on several
variables that have been excluded in the present study; for
instance, cultural, social and psychographic demographics
(Bobek, Hageman, & Kelliher, 2013; McGee, 2011; Torgler,
2006); effect of inflation on tax evasions (Matitsin &
Ershov, 2012); tax anomalies and tax evasions (Burov &
Samarukha, 2010); perception analysis between graduates
and postgraduates (Gupta & McGee, 2010) and between
college students and faculties (McGee & Rossi, 2008).
Moreover, perception studies may be attempted by
incorporating research questions covering loopholes and
multiple irrelevant deductions and exemptions in the
context of personal income tax practices. Research agenda
in future may also be directed towards assessing the impact
of evasions of multiple indirect taxes in government
exchequers by accessing databases from tax authorities.
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