The Impact of Tax Arrears on Financial Stability and Strategies for Compliance Enhancement

Abstract

Accumulated tax arrears pose significant challenges to government fiscal management by disrupting liquidity, raising the risk of budget deficits, and potentially threatening financial system stability. Difficulties in tax compliance and inefficiencies in tax administration further exacerbate this problem. This study aims to examine the effects of tax arrears on financial stability and explore strategies to enhance tax compliance as a means of supporting sustainable economic growth. Employing a Systematic Literature Review (SLR), the research synthesizes findings from reputable databases from Google Scholar with a focus on the interplay between tax arrears, fiscal stability, and relevant tax policies. Findings indicate that tax arrears undermine financial stability by reducing state revenues and increasing fiscal vulnerabilities. Measures such as reforming tax administration, conducting public education campaigns, and enforcing tax regulations have been shown to improve compliance, strengthen financial stability, and promote long-term economic growth. Effective implementation of these strategies is crucial to ensuring a stable fiscal environment and resilient economy.