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Elimination of tax complexity issues through financial literacy

Author

Listed:
  • Fuad Bahramov

    (University of Oradea, Oradea, Romania)

Abstract

Modern taxation systems often experience complexity and investigations have attempted to define whether the tax complexity has an impact on the compliance of taxpayers. A low level of literacy can be an obstacle in the tax system. This paper will examine the impact of financial literacy on tax revenues to prove the relationship between literacy and taxation. The study will also provide suggestions for developing financial literacy which may reduce the negative influence of tax complexity on tax compliance. The educational systems do not provide taxation as a subject at any stage, however, tax knowledge is required for understanding taxes and for implementation of tax calculations and those skills directly affect the finances of individuals and the performance of businesses. A low level of financial education and tax knowledge in society affects the financial attitude of individuals and households which can lead to lower tax compliance and eventually, create a fertile environment for tax evasion. The tax complexity concerns not only people and businesses but also governments and tax administrations, because it also decreases tax revenues in the end. The study will use a simple regression model as a method in order to find out the relationship between financial literacy and taxation, as well as it will support suggestions to eliminate tax complexity issues. The main tax variables will be taken from the Eurostat database and financial literacy variables will be sourced from the OECD survey of financial competencies. Every individual and country must take financial education into serious consideration to avoid the anticipated consequences in personal life and negative results in economic development.

Suggested Citation

  • Fuad Bahramov, 2023. "Elimination of tax complexity issues through financial literacy," Journal of Financial Studies, Institute of Financial Studies, vol. 8(Special-J), pages 13-22, June.
    • Handle: RePEc:fst:rfsisf:v:8:y:2023:i:special-june_2023:p:13-22
    DOI: 10.55654/JFS.2023.SP.01
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    References listed on IDEAS

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    1. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    2. Eriksen, Knut & Fallan, Lars, 1996. "Tax knowledge and attitudes towards taxation; A report on a quasi-experiment," Journal of Economic Psychology, Elsevier, vol. 17(3), pages 387-402, June.
    3. Ahmed Razman Abdul Latiff & Bany Ariffin Amin Noordin & Mohamad Raflis Che Omar & Dwipraptono Agus Harjito, 2005. "Tax Literacy Rate Among Taxpayers: Evidence From Malaysia," Jurnal Akuntansi dan Auditing Indonesia, Accounting Department, Faculty of Business and Economics, Universitas Islam Indonesia, vol. 9(1), pages 1-11, Juni.
    4. Jing Xiao & Cheng Chen & Fuzhong Chen, 2014. "Consumer Financial Capability and Financial Satisfaction," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(1), pages 415-432, August.
    5. Ahmed Razman Abdul Latiff & Bany Ariffin Amin Noordin & Mohamad Raflis Che Omar & Dwipraptono Agus Harjito, 2005. "Tax Literacy Rate Among Taxpayers: Evidence from Malaysia," Jurnal Akuntansi dan Auditing Indonesia, Accounting Department, Faculty of Business and Economics, Universitas Islam Indonesia, vol. 9(1).
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    More about this item

    Keywords

    financial literacy; tax literacy; tax complexity; taxation; tax systems.;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education

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