Nudges as a panacea for tax compliance: a developing country perspective

Dorcus Kalembe, James Odongo, Twaha Kigongo Kaawaase, Louis Kalusa and Joseph Okello

Journal of Financial Crime, 2025, vol. 32, issue 5, 1099-1119

Abstract: PurposeThe purpose of this study was to assess whether nudging strategies steer tax compliance among small and medium enterprises (SMEs) in Uganda.Design/methodology/approachThe study adopted a cross-sectional research design. The authors used a survey questionnaire to collect quantitative data from 370 SMEs. Data were analyzed using Statistical Package for Social Scientists (SPSS V.25) and Partial Least Squares- Structural Equation Modelling (PLS-SEM V.4).FindingsThe results indicated that reminders, social norms and simplified tax laws and rules positively and significantly influence variations in tax compliance. The findings further revealed that persuasive messages do not enhance tax compliance among SMEs in Uganda.Research limitations/implicationsThe study’s results are only limited to SMEs in Uganda, which hinders generalization of results. Recent research has highlighted the importance of deterrence strategies in increasing tax compliance. However, such measures are more convoluted than previously imagined. This study focused on nudging strategies as a prelude to tax compliance. Regulators and policymakers should integrate nudging strategies into tax frameworks to encourage taxpayers to become tax-compliant.Originality/valueTo the best of the authors’ knowledge, this is the first study in Uganda to present insights into how individual nudges as behavioral or psychological interventions can improve tax compliance among SMEs. Unlike other studies, this study used the nudge theory to explain tax compliance in the context of Uganda.

Keywords: Tax compliance; Nudges; Nudge theory; SMEs; Uganda (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-02-2025-0038

DOI: 10.1108/JFC-02-2025-0038

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