The Perception of Tax Complexity within Local Authorities VAT framework: Evidence from Portugal

The relevance of the impact of tax complexity on tax noncompliance justifies the study of tax complexity in the scope of several taxpayers, including local authorities. This chapter analyses the case of the value added tax (VAT), a typical example where the misuse of exemptions and no subjections imply the no payment of taxes by citizens. Therefore, this chapter tries to assess, qualitatively and quantitatively, the levels of tax complexity perceived in local authorities' administrations through the amount of binding tax information those organizations request. The results suggest a high degree of perception of tax complexity and uncertainty as well as a lack of transparency associated with the tax framework of the activities of local authorities. It is pointed out that the perceived complexity is essentially legal. Moreover, the findings establish a relation between some more complex legal changes with great tax impact within these entities and the increase of the number of binding tax information requested on their subjects.