Anatomy of Filing Non-Compliance in VAT systems

Investigating why businesses fail to comply with VAT filing requirements in Bihar and Delhi.

Project Introduction

VAT is a critical pillar of domestic revenue systems worldwide, designed to provide stable tax revenues that fund public services and support economic development. Despite its widespread use, compliance challenges remain, including delayed filings, reporting errors, and administrative difficulties that limit its effectiveness. This study examines how the complexity of VAT regulations, the administrative burden of compliance, and firm-specific factors such as size, sector, and location contribute to non-compliance, alongside broader contextual issues such as differences in local enforcement environments and the level of support and guidance available to businesses.

Partners

Researchers

Project Methodology

The research draws on telephonic surveys with thousands of business owners in Bihar and Delhi to examine the drivers of VAT filing non-compliance. The survey instrument probes how regulatory complexity, administrative burden, and firm characteristics such as size, sector, and location shape compliance behaviour, while also capturing differences in local enforcement environments and the guidance and support businesses receive from tax authorities. This ground-level data allows the study to move beyond aggregate compliance statistics to understand the specific frictions businesses face when filing VAT returns.

Impact

This study provides detailed, ground-level evidence about the factors influencing compliance behaviour among businesses, which can inform policymakers considering reforms to simplify VAT processes, enhance taxpayer education, and build better support structures. Understanding the reasons for non-compliance is crucial for designing effective strategies to improve compliance rates, strengthening the government revenue base needed to sustain public investment in infrastructure, healthcare, and education. Research of this kind contributes to building a fairer, more effective tax system that reflects the realities businesses face on the ground.

Documentation

This project is currently in progress, and will be updated with findings as results arise.

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