Effect of Tax Modernization on Voluntary Tax Compliance with a Moderating Role of Tax Awareness and Education: Evidence from Implemented Services Tax in Khyber Pakhtunkhwa

Abstract

This study investigates voluntary tax compliance with the sales tax on services in Khyber Pakhtunkhwa (KP), Pakistan, after its decentralization in 2010 under the 18th amendment in the constitution of the Islamic Republic of Pakistan. Focusing on tax modernization and its impact on tax compliance, with the moderating role of tax awareness and education, the research examines data from 440 taxpayers registered with the Khyber Pakhtunkhwa Revenue Authority using SPSS-23 software. The aim is to identify the factors influencing tax compliance in a region experiencing legislative transformations, thus enriching the existing literature on tax compliance with region-specific insights. The study highlights the critical role of tax system modernization and educational efforts in enhancing compliance and offers practical recommendations for policymakers and tax administrators. The findings underscore the nuanced dynamics of tax compliance in KP and suggest targeted strategies for improving compliance rates and taxpayer services, potentially applicable in similarly transforming regions. This research provides valuable theoretical and practical insights into tax compliance, making significant contributions to both the field and tax administration practices.