Modelling the Implications of Disproportionate Tax Compliance Costs for European SMEs

Details

Supervisors

Agrell, Per Joakim

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

This thesis explores the significant disparities in tax compliance costs between small and medium-sized enterprises (SMEs) and larger corporations in Europe and examines the extent to which traditional tax audit models address these differences. Specifically, by extending an auditing model from the literature (Greenberg, 1984) to account for the disproportionate tax compliance burden SMEs bear in comparison to large businesses, we reveal significant shortcomings in the model. Our analysis demonstrates that such traditional models inadequately capture the unique challenges faced by SMEs, necessitating a differentiated approach in tax audit policies. We propose modifications to the model to create a more equitable and effective auditing mechanism that supports the economic sustainability of SMEs, while ensuring tax compliance and minimizing evasion.