Do corporate governance, internal control and economic determinants matter? Value added tax non-compliance from perspective of external auditors: Jordanian evidence

Purpose This study aims to investigate how important economic factors – including value added tax complexity, value added tax sanctions, the power of the tax authority and internal controls – influence value added tax noncompliance decisions. It also looks at the moderating impact of corporate governance in these interactions using deterrence and agency theories. Design/methodology/approach A self-administered survey was given to a random sample of 277 external auditors in Jordan. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used to analyze the data to determine whether there were any direct and moderating impacts. Findings The results indicate that power of tax authority, value added tax sanctions and internal control are negatively associated with value added tax noncompliance, while value added tax complexity is positively associated. Moreover, corporate governance significantly moderates the effects of these variables on value added tax noncompliance, suggesting that strong governance enhances compliance through internal accountability mechanisms. Practical implications The results of this study can aid legislators and regulators in comprehending the factors contributing to higher value added tax noncompliance, as well as the impact of economic drivers, internal control and corporate governance in reducing value added tax noncompliance. The results may also aid regulators, shareholders and investors in developing internal and external policies that promote improved alignment. To deal with value added tax compliance. This study offers unique evidence and insights from the developing economy that increase the understanding and may serve as inspiration for other academics in their future work. Social implications The results can inform policymakers and tax authorities on the importance of corporate governance and internal controls in reducing value added tax noncompliance. This study highlights the need to enhance governance awareness, institutional accountability and education among value added tax-paying entities in developing economies like Jordan. Originality/value Unlike most existing studies that focus on income tax compliance, this research contributes novel insights into value added tax noncompliance, particularly from the perspective of external auditors. To the best of the author’s knowledge, this study is among the first to empirically integrate deterrence and agency theory in explaining value added tax behavior. Moreover, this study is among the first studies to examine the relationship between moderating effect of corporate governance on economic determinants, internal control and value added tax noncompliance, particularly in the context of emerging economies such as Jordan.