Self-employed individuals and their knowledge of VAT in Malta : an analysis

Abstract

Purpose: Value Added Tax (VAT) is a form of indirect tax on consumption which is borne by the end consumer. The role of self-employed persons in the collection and payment of VAT is imperative as they act as intermediaries between the end-consumer and government. To this end, this study aimed to analyse self-employed individuals’ understanding of VAT and their obligations; to examine the differences in self-employed persons’ understanding of VAT based on the industry they operate in; and to evaluate respondents’ feedback on different methods that may be used to improve self-employed individuals’ understanding of VAT in Malta. Additionally, the study aimed to explore respondents’ willingness to improve their VAT knowledge, and whether they outsource their VAT obligations. Design: Adopting a realist ontology and a positivist epistemology, a quantitative method was applied. A questionnaire was designed and distributed both online and by hand. A total of 232 responses were collected and analysed using SPSS software. Findings: The findings of this study were analysed using the VAT 5-Step methodology as a framework for assessing respondents’ VAT knowledge. The results indicate that self-employed individuals exhibit stronger conceptual understanding than technical legal knowledge. Additionally, procedural knowledge was also found to be limited in certain areas. This study also identified no significant relationship between occupations and VAT understanding among self-employed individuals. Finally, respondents expressed a willingness to improve their knowledge of VAT and supported both formal and informal avenues for taxation education. Conclusions: The study concludes that further education and training on VAT is needed among self-employed individuals. A combination of formal education and accessible, diverse learning resources is recommended to strengthen VAT compliance and understanding. Moreover, emphasising the benefits of taxation knowledge should also instil self-employed persons to learn more about VAT. Value: This study underscores the need for improved VAT knowledge among self-employed individuals to better support Malta’s fiscal system. The recommendations for improved educational resources allow these intermediaries to benefit from greater VAT awareness, including minimising errors and reducing costs.