Institutional Theory and Tax Compliance: A Systematic Literature Review

Abstract

The role of tax in any economy is of paramount importance since it contributes to the implementation of government plans and budget. Therefore, this study systematically reviewed the role of institutional theory in promoting tax compliance. The study used the PRISMA 2020 approach, 23 articles, thematic analysis, NVivo qualitative data analysis, and SPSS for descriptive data analysis. The study explored the characteristics and patterns of the studies in relation to the institutional theory variables. Study findings indicated that higher integration of institutional theory variables into tax compliance was conducted mostly in Asian and African countries in the 2020s. Also, study findings indicated that the regulations and normative pillars are frequently invoked to dominate the literature, whereas the cultural cognitive pillar is rarely studied. Additionally, while studies conducted in developing countries examined both the regulative and normative pillars, those in developed countries focused more on the regulative pillar. Additionally, the results suggest that the theory was reasonably utilized in explaining tax compliance among SMEs rather than among corporate entities. Generally, the review concludes that further studies are required to explain how institutional theory promotes tax compliance across developed and developing countries and across corporate entities. Studies that focus on normative and cultural cognitive aspects and intercountry studies are highly in demand, while policymakers should formulate and amend policies to promote tax compliance, focusing on the proper functioning of regulations, cultural and normative facets.