AN EXPLORATORY STUDY ON AWARENESS AND CHALLENGES OF SMALL AND MEDIUM ENTERPRISES WITH RESPECT TO VALUE ADDED TAX COMPLIANCE IN SULTANATE OF OMAN.

Abstract

His Majesty Sultan Haitham bin Tarik has endorsed the launch of the future vision “Oman 2040. The 2040 vision aims to ensure Sultanate of Oman is among the ranks of the world’s most developed nations assuring sustained prosperity and security for all.  Sultanate of Oman is the fourth GCC country that implemented Value Added Tax system, following the UAE, Saudi Arabia and Bahrain. Value Added Tax (VAT) is a crucial component of modern taxation systems worldwide, serving as a significant revenue source for governments. The introduction of VAT impacts businesses of all sizes, with SMEs often facing distinct challenges due to limited resources and expertise. The objective of this study is to assess the awareness of SMEs in Nizwa City regarding the key aspects of Value Added Tax and their compliance with the tax regulations. The study aims to explore the relationship between awareness levels and compliance behavior, identifying the influence of awareness on compliance to VAT.   Furthermore, the study seeks to provide insights into the specific challenges faced by SMEs in Nizwa City in relation to VAT compliance.  The study followed an exploratory approach and primary data were collected through questionnaire from 120 SMEs in Nizwa City by using Convenient Sampling method.  The primary data were collected on awareness levels, compliance behaviors, and challenges faced. The collected data underwent both descriptive and inferential analyses. 

The study found that the respondents (of SMEs) have ‘Knowledge on Tax Rates” is the strongest influencing aspect and “Registration and Maintenance of Accounts and Records” is the least aspect in predicting Compliance to VAT.  The study also identifies and examines the prominent challenges impeding SMEs' seamless adherence to VAT regulations. Therefore, the study suggested for initiating specialized workshops and training sessions focused on this specific aspect can provide practical guidance on proper record-keeping and registration procedures and offering personalized consultation services and guidance, ultimately leading to improved compliance with VAT regulations. By fostering collaboration, disseminating knowledge, and offering practical solutions, the study contributes to the potential for smoother VAT implementation, ensuring the growth and success of SMEs within the evolving tax framework of the study region.

Keywords: Value Added Tax, Compliance, Awareness, SME, Knowledge on Tax Rates, Filing of Tax Returns, Registration and Maintenance of Accounts and Records.