Changes in tax behavior after the audit abolishment -A study based on the micro-entrepreneur's perspective

Abstract: Introduction: Since a changed regulation in November 1, 2010 smaller businesses could choose if they want to use an auditor or not. The businesses that may have free audit duty are called micro-­‐ enterprises. They alone stand for 39 percent of the nation inaccurate taxation. Our view has been that, through qualitative interviews with micro-­‐entrepreneurs, clarify the tax behavior status in Sweden today. The study aims to clarify how their tax behavior has changed since 2010 and if the 39 percent nation inaccurate taxation can be explained by the abolition of mandatory auditing. Methodology: The study made use of qualitative interviews. In the interviews, a semi-­‐structured interview guide served as a base, but the respondents have been encouraged to open up the discussions. The study has been structured around four themes as follows: Functions of accounting (the main theme), principal-­‐agent theory, legitimacy theory and tax compliance. The study follows these themes through the sections frame of reference, empirical results and analysis. Analysis and Conclusion: The results of the study have shown that the principal-­‐agent relationship between micro-­‐entrepreneurs and the Swedish Tax Agency has changed since the audit requirement was abolished in 2010. The accounting knowledge in the micro-­‐enterprises has been reduced. Some micro-­‐entrepreneurs have chosen to compensate for this by buying in external knowledge in the form of an accounting consultant. The change in the principal-­‐agent relationship has not affected the micro-­‐ entrepreneur's legitimacy towards the STA. They do however believe that their own legitimacy has been reduced by the change of law, in the eyes of banks and investors. The result of the study shows that the proportion of the inaccurate taxation among micro-­‐entrepreneurs in Sweden has increased due to a change in tax behavior. Micro-­‐entrepreneurs have changed the way they handle their tax reports and accounts, i.e. not the tax compliance.