The effect of perceptions of tax liabilities regarding tax crimes and penalties on tax compliance

It is important to identify the factors that affect tax compliance in order to strengthen taxpayers' tax compliance. In utility-maximization model proposed by Allingham and Sandmo which might serve as the basis in this context, tax rate, amount of penalty and control rate are the significant factors that affect tax compliance. Based on this theory, the goal of this study is to reveal the impact of taxpayers' perception of tax crime and penalty on tax compliance. A survey was conducted with 401 taxpayers living in İstanbul in order to obtain their views on tax penalties. Study results indicate that taxpayers' tax penalty perception is 3.10 on the scale. Reasons that drive taxpayers to tax evasion are high tax rate with 11 %, followed by unfair tax system, insufficient tax control and the opinion that everybody evades tax paying. Factors that affect taxpayers' tax crime and penalty perception are going through control and the number of controls. Taxpayers who go through more controls have a stronger perception of tax crime and penalty than taxpayers who through less controls. Study results indicate that taxpayers who go through control have better knowledge of tax crimes, potential penalties in cases of tax evasion and irregularity fines. Taxpayers who through control do not find tax penalties fair. On the other hand, taxpayers whose tax compliance is high regard taxpayers who commit tax crimes as thieves, traitors and unethical.