Non compliance of tax laws can be said to be a failure, intentional or unintentional, of taxpayers to meet their tax obligations. This lack of compliance can be as a result of different factors as indicated below:
- A Rising or High Tax Burden: Individuals and organizations will tend to be non compliant to tax laws when the taxes are deemed to be high as compared with the cost of living. In such a case taxpayers will tend to avoid payment of taxes so as to have a sizeable amount of money to be used in the purchase of different commodities.
- Lack of Knowledge on Tax Laws: This point focuses on the unintentional failure of a taxpayer to comply to tax laws. An example would be a small or medium enterprise that does not know that it is required by law for their businesses to be registered and as such pay taxes. Further, taxpayers would like the actual location or requirements needed for them to comply.
- Complexity of Tax Laws: Unintentional non-compliance may also be caused by the complexity of tax laws, that is by the difficulty of keeping accurate records and the inability to obtain the information needed to comply. For example, low-income taxpayers who cannot afford to employ tax agents could face problems understanding basic laws and even routine mathematical operations and interpreting the tax tables may present problems.
- Tax Evasion: Tax evasion is the failure to declare taxable activity or income and this is a practice in the employment of the services such as consultancies, builders, plumbers and decorators. This intentional non-compliance requires the taxpayer to have some measure of understanding of the tax system.
- Weak Tax System: This can also lead to intentional non compliance of tax laws as taxpayers are able to utilize loopholes in the tax system. As such, this encourages taxpayers to be non compliant as they are assured of not facing prosecution.