Tax Compliance in Immigrant Communities: Bangladeshis in the UK Submitted by Md Zakir Hossain Akhand to the University of Exeter as a thesis for the degree of Doctor of Philosophy in Accountancy In March 2018 This thesis is available for Library use on the understanding that it is copyright material and that no quotation from the thesis may be published without proper acknowledgement. I certify that all material in this thesis which is not my own work has been identified and that no material has previously been submitted and approved for the award of a degree by this or any other University. (Signature) ……………………………………………………………………………………… 1 Abstract This thesis employs Bourdieu’s theory of practice to explore small immigrant business owners’ adaptation to the host country’s income tax system. In doing this, the thesis applies a sociological perspective in the theorizing and study of their tax compliance behaviour. Drawing on a survey (N=101) and in-depth interviews (N=27) with Bangladeshi family business owners and their tax advisers in the UK, this thesis demonstrates that immigrant business owners’ engagement with the host country’s tax system is grounded in the sociocultural status they inherit from their country of origin, even though their social class positions in the new society unconsciously condition and impact on how they practise tax compliance. Findings suggest that the power relations inherent in the tax professional-taxpayer relationship act as a critical factor in the reproduction and transformation of immigrant business owners’ moral disposition towards compliance with tax laws. The thesis argues that the ways small Bangladeshi family business owners think, feel and act in their approach to tax compliance is likely to differ not only from those of native business communities but also from those of other immigrant communities in the UK. 2 Dedication To Sabina for remaining by my side for nearly thirty-five years as my chief sounding board, my chief critic, and my true partner in life. 3 Acknowledgements Praise belongs to God, the Lord of all Being. Finally, I have reached the end of another long doctoral research haul. This would not have been possible without the authoritative guidance, supervision and help of Professor Lynne Oats. At every turn in the research, her sharp intellect and keen insight saved me from making wrong moves. I owe her a debt that words cannot repay. My heartfelt thanks go also to Dr Gregory Morris, my co-supervisor, for his informed critique and collegial counsel. My wife Sabina – herself an airline training professional with many academic and research ideas – has provided patient and loving support throughout the years it took to complete the study. My son Sam has been a wonderful source of fun and respite from the heavy sifting of academic material. I am grateful to Tommy, our pet cat (my son has serious objections using the word ‘pet’ for him, rather than ‘person’!) for the cuddles and bites I have received in equal measure. Many people criticised and reacted against my embarking on this PhD journey, but some did not. I gratefully acknowledge Mr Parvez Iqbal and Mr Syed Zakir, my NBR colleagues, who were the first to think that such an attempt could be meaningful. I must also acknowledge the love and affection of auntie Nilufar in the process of obtaining leave from my government post, which was an almost impossible task for me. Many people took part in the research itself, providing documents, or making time to participate in a survey or an interview. In particular, the Bangladeshi communities in London, Birmingham and Exeter showed great concern and generosity in making the research a success. They provided the foundation for this research. Without their experience and knowledge, my work would have been merely a shadow of what it is now. I should also like to acknowledge the generosity of the Exeter Business School in awarding a scholarship which was invaluable in sustaining me throughout the years it took to write the thesis. A great number of friends and colleagues helped during my stay at Exeter University, and a thousand thanks to all of them: Dr Kate Gannon, whose support for a visa application, help with field work funding and air-tickets, has been immense; Martin, a fellow PhD colleague from Slovakia, who provided many laughs and brilliant ideas about tax research; Festo, another fabulous PhD colleague from Uganda, and a friend as well, who has been a great companion in sharing the highs and lows of postgraduate research; and Dr Arefin, a long- time and very close friend, whom I met in Canada at the end of my research, and who has been a constant source of advice on almost all spheres of my individual and social activity. Special thanks to my sister Jahanara and my brother Sajjad, who have kept me company on my journey against all the odds. And last, as always, I express an enormous sense of gratitude to my parents who made sacrifices for me to thrive. The sweetest memories of them will remain in my heart for all the remaining days of my life. 4 Table of Contents Abstract ........................................................................................................................................ 2 Dedication .................................................................................................................................... 3 Acknowledgements .................................................................................................................... 4 Table of Contents ....................................................................................................................... 5 List of Tables ............................................................................................................................. 10 List of Figures ............................................................................................................................ 11 List of Charts ............................................................................................................................. 12 CHAPTER I ............................................................................................................................... 13 INTRODUCTION ...................................................................................................................... 13 1.1 Introduction and Statement of the Problem ............................................................... 13 1.2 Motivation for the Research ......................................................................................... 14 1.2.1 Why Family Businesses? ...................................................................................... 15 1.2.2 Importance of the Immigration Context ............................................................... 16 1.2.3 Why Bangladeshis?................................................................................................ 18 1.3 Aims and Objectives of the Study ............................................................................... 19 1.4 Research Question and Methodology ........................................................................ 20 1.5 Scope of the Study ........................................................................................................ 23 1.6 Significance of the Study .............................................................................................. 24 1.7 Structure of the Thesis .................................................................................................. 27 CHAPTER II .............................................................................................................................. 30 BACKGROUND TO THE STUDY .......................................................................................... 30 2.1 Introduction ..................................................................................................................... 30 2.2 Immigrant Businesses in the UK ................................................................................. 30 2.2.1 Characteristics of UK Immigrant Businesses ..................................................... 31 2.2.2 The Mix of Immigrants and Immigrant Businesses in the UK .......................... 32 2.2.3 Geographical Spread of the UK’s Immigrant Businesses ................................ 35 2.3 Bangladeshi Immigrants and Their Businesses ........................................................ 38 2.4 Challenges and Prospects of Immigrant Businesses in the UK ............................. 41 2.5 Taxation in the Homeland: SME Tax Compliance in Bangladesh.......................... 44 2.5.1 Tax System of Bangladesh: A Brief Overview ................................................... 44 2.5.2 Tax Ethos in Bangladesh ...................................................................................... 46 2.6 Small Business Tax Compliance in Bangladesh....................................................... 51 CHAPTER III ............................................................................................................................. 56 5 TAX COMPLIANCE IN IMMIGRANT FAMILY BUSINESSES .......................................... 56 3.1 Introduction ..................................................................................................................... 56 3.2 Family Businesses: Importance, Scope and Definition ............................................ 57 3.2.1 Essential Characteristics of Family Businesses ...............................................