This study aimed to explain the process of formation and reproduction of tax fraud risk in Iran’s tax system. The study is applied in purpose and qualitative in nature, based on grounded theory using the systematic approach of Corbin and Strauss (1990). Data were collected through 18 in-depth semi-structured interviews with organizational, professional, and academic experts selected purposively and through chain referral, and were analyzed using constant comparison. Theoretical saturation was reached around the fifteenth interview, as no new significant concept emerged. Three additional interviews were conducted to ensure category adequacy. Coding was performed independently by two coders, and their agreement was assessed using Cohen’s Kappa (0.826). Analysis involved open, axial, and selective coding, resulting in nine axial categories: the nature of tax fraud; economic factors and financial pressures; managerial and behavioral factors; organizational structure and internal controls; the legal and regulatory system; the monitoring and deterrence system; information infrastructure and technology; environmental, cultural, and institutional factors; and warning indicators and the integrated framework. These categories were integrated around the central phenomenon of “tax fraud risk” in a paradigmatic model. The findings indicate that tax fraud risk emerges from interactions among economic, managerial, organizational, institutional, and informational factors and, through action/interaction strategies, leads to weakening of the tax system, disruption of fair competition, erosion of institutional trust, and declining information transparency. Overall, tax fraud risk is a context-bound and feedback-driven phenomenon. Accordingly, using integrated data and warning indicators