MENTAL ACCOUNTING, PERCEIVED TRUST IN THE REVENUE AUTHORITY AND VOLUNTARY TAX COMPLIANCE OF GAMBIAN TAXI DRIVERS

Abstract

Accounting literature is awash with previous studies on tax compliance behavior of taxpayers yet there is no consensus among scholars on the factors that influence voluntary tax compliance of taxpayers especially in developing countries. This study examines the effect of mental accounting and perceived trust in the revenue authority on voluntary tax compliance behavior of Gambian taxi drivers. Primary data for the study were obtained from a sample of 103 taxi drivers in Banjul, Turntable and Serrekunda; and analysed using the structural equation model. Findings of the study suggest that mental accounting has a positive significant effect on tax compliance behavior of Gambian taxi drivers while perceived trust in revenue authority had a positive but insignificant effect on voluntary tax compliance of Gambian taxi drivers. The study concludes that mental accounting affects the voluntary tax compliance behavior of Gambian taxi drivers while trust in revenue authority does not. Based on the findings of the study; the study recommends that Gambian Revenue Authority (GRA) should provide mental accounting tools such as budgeting templates or mobile apps to help taxi drivers track their income and expenses in order to facilitate voluntary tax compliance among taxi drivers in The Gambia. Similarly, GRA should implement mental accounting- friendly tax policies by utilizing behavioral economics insights to enhance voluntary tax compliance in Gambia.