Voluntary Tax Compliance

The Case of Bhutan

Abstract

This study examines the current state of tax compliance among Bhutanese taxpayers with respect to direct taxation: Business Income Tax (BIT), Corporate Income Tax (CIT), and Personal Income Tax (PIT). It explores common forms of noncompliance, investigates the underlying causes, and identifies strategic actions that the Department of Revenue & Customs (DRC) can implement to encourage voluntary compliance. Primary data were collected through both paper-based and online questionnaires administered to 338 taxpayers. The study found that the primary reasons for non-compliance include cumbersome compliance procedures, limited awareness of tax laws, and unfavorable perceptions of taxation. Some taxpayers view tax obligation as burdensome or inadequately acknowledged, while others perceive tax rates are unreasonably high, admitting to deliberate non-compliance. A notable proportion of respondents even consider tax evasion as social norms and acceptable behaviour. These findings highlight the need for targeted policy interventions, including the simplification of tax procedures, improved taxpayer education, and initiatives to positively sway public attitudes toward taxation. The study offers practical recommendations aimed at strengthening Bhutan’s tax system and fostering a culture of voluntary compliance.