Compliance of Value Added Tax (VAT) Policy in Nepal: A Heuristic-Institutional-Functional Analysis

The synthesis of implementation theories illuminates on the policy mandates, individual and institutional capability and constructive engagement of the stakeholders. The compliance of the Value Added Tax (VAT) policy has been analyzed in light of different implementation theories. A structural and functional analysis has been conducted in order to understand the causes behind the poor compliance of VAT policy in terms of returns filing. The two-phase sequential mixed methods have been applied to study as to what extent policy mandates and the institutional capability of the tax administration affect to shape the compliance behavior of the taxpayers. The bivariate analysis of the responses and the nonparametric chi-square test showed the varied results. In the first phase, quantitative research question and hypothesis were tested to find the relationship between policy mandates and filing compliance and between institutional capability and filing compliance of VAT policy with the survey of taxpayers and tax officials; tax intermediaries; officials of the business communities; and with policy makers. In the second phase, qualitative interviews and Focus Group Discussions (FGD) were administered among tax officials and policymakers to inquire into significant quantitative results on filing compliance behavior of the taxpayers. The ontological stance that the policy clarity ensures effective implementation of the public policy is upheld.
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