Tax compliance as a driver for adopting information technologies – effect on competencies development and on competitive advantages

Date04 December 2019
Published date04 December 2019
AuthorAdérito Leitão Martins,Winnie Ng Picoto
Subject MatterInformation & knowledge management,Information systems,Information & communications technology
Tax compliance as a driver
for adopting information
technologies eect on
competencies development and
on competitive advantages
Adérito Leitão Martins
ISEG, Lisboa, Portugal, and
Winnie Ng Picoto
Department of Management, ISEG, Lisboa, Portugal
Purpose The adoptionof information systems (IS) by small-and medium-sized enterprises(SME) leads to
the acquisition of new competencies and relative advantages. In some cases, the decision to adopt IS results
from legalobligations that companiesmust comply with. This paperaims to assess the effect of the mandatory
digitaltransmission of documentsto the tax and customs authorityon the decisionto adopt IS by SMEs.
Design/methodology/approach The authors propose a researchmodel to analyze the antecedents of
IS adoption and the relationship between that adoption and the development of new competencies and the
consequent relative advantages. Based on the data from 94 European SMEs, this paper tests the research
model with a partialleast squares approach.
Findings The ndings showthat companies decide to adopt IS due to their obligationsfor tax compliance.
However, while some companiesdecide to adopt basic IS just to comply with the transmission of documents,
others decidedto implement more complex systems to satisfy widercompany needs.
Research limitations/implications Due to time constraints, the characteristics of the respondents
such as their sector of activity, the sensitivity of companies and entrepreneurs to IS, their geographic
distributionor years of activity were not studied. As mentionedabove it is important to investigate further the
characteristics of the companies and their differentiation factors between those who only invest to reduce
costs and those that see IS as a differentiatingfactor. This factor could be a source of information to study the
companyand its environment that is very useful in increasinglycompetitive markets.
Practical implications This study is important because it shows managers the possible ways of
thinkingthat can guide their investment decisionsand whether these will lead them to face futurechallenges.
Originality/value For researchers, this paper shows how a change in the law may have an effect on
decisions to adopt technology and how existing theories can be applied to study the effects of changes in the law.
Keywords Competences, Competitive advantages, IS adoption, Tax compliance systems
Paper type Research paper
1. Introduction
Information technologies (IT) and information systems (IS) are present in every company
and are important resources for achieving corporate goals. IS allows companies to improve
The authors gratefully acknowledge nancial support from FCT- Fundação para a Ciencia e
Tecnologia (Portugal), national funding through research grant UID/SOC/04521/2019.
Eect on
Received6 June 2019
Revised21 October 2019
Accepted22 October 2019
Journalof Systems and
Vol.22 No. 1, 2020
pp. 1-19
© Emerald Publishing Limited
DOI 10.1108/JSIT-06-2019-0112
The current issue and full text archive of this journal is available on Emerald Insight at:
their efciency and effectiveness and to gain competitive advantages (Thong, 1999). Thus,
companies invest in IT with the main intention of improving processes and reducing costs
(Trantopoulos et al.,2017). Governments, on the other hand, encourage IT adoption by
small-and medium-sizedenterprises (SMEs) to combat poverty, to facilitate communications
and trade agreements, to improve market efciency, and to increase productivity (Nicol,
2003;Kyobe, 2009). The adoption of technologies has direct effects on corporate processes
(Reis and Freitas, 2014) as it has the potential to leverage competitiveness and generate
information to supportdecision-making (Reis and Freitas, 2014).
Governments have been expanding their services on the internet to provide greater
effectiveness,efciency and convenience to citizens (Lee et al., 2011;Shareef et al.,2011;Chen
et al.,2015). Online tax processing is an example of servicesprovided over the internet by the
government to citizens and to businesses (Chang et al.,2005;Chen et al., 2015). More than
160 countries have implementedthe value added tax (VAT) (Azmi et al.,2016). Although the
government perceives the VAT as highly efcient in generating higher tax collection and
decit reduction (Lee et al., 2013;Azmi et al.,2016), its effect is greater on SMEs when
compared to large companies(Gunz et al.,1995;Azmi et al., 2016).
The Portuguese Decree-Law no. 198/2012 of August 24 (Decreto-Lei n.o 198/2012,2012)
establishes control measures for the issuance of invoices and other documents with scal
relevance and denes the processes for their transmission to the tax and customs authority
(TCA). Among other obligations, as from January 1, 2013, companies that conduct
transactions subject to the VAT are obliged to communicate to the TCA by electronic
transmission of all data pertaining to the VAT code (paragraph 1 of 3rd article of Decree-
Law no. 198/2012). Firmscan adopt one of the following options:
real time electronic data transmission, through the electronic invoice software;
electronic data transmission, through a standard le structured according to SAF-T
(PT)[1]le with invoices elements;
direct input in the Portal das Finanças; and
electronic transmission by other means, in terms to be dened by the Finance
Therefore, the Decree-Law no.198/2012 obliges companies to adopt an IS (for those that did
not have one) for the rst time to transmit the invoices to the TCA or to adapt their existing
IS to do so (Azmi et al., 2016). In fact, one of the reasons why small and medium companies
invest in IT is to comply with their scalobligations (Hansford and Hasseldine, 2012;Azmi
et al., 2016). Nevertheless, someof those companies may see this new regulatory demand as
an opportunity to implement a more comprehensive IS support other business processes
besides invoicing,as, for example, enterprise resource planning (ERP) systems.
Considering this recent legal requirement, this study examines whether the changes in
the legal framework inuence the adoption of IS and in the acquisition of new IS/IT
competencies. In other words, we aim to understand if a legal imposition that leads to the
adoption of an IS has a widespread effectin terms of adoption of a comprehensive IS and the
creation of new IS competencies.We propose to answer the following research questions:
RQ1. What is the effect of the obligation to electronically transmit documents on the
adoption of IS and morecomprehensive IS by SMEs?
RQ2. What are the effects of that IS adoption on the developmentof IS/IT competencies
and on the competitive advantages for SMEs? Based on the technology-
organization-environment framework (Tornatzky and Fleischer, 1990) and on the

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