Enhancing Tax Compliance in Malaysia: Does Tax Learning and Education Matter?

  • Norul Syuhada Abu Hassan Faculty of Economics and Management, National University of Malaysia, MALAYSIA
  • Mohd Rizal Palil Faculty of Economics and Management, National University of Malaysia, MALAYSIA
  • Rosiati Ramli Faculty of Economics and Management, National University of Malaysia, MALAYSIA
  • Ruhanita Maelah Faculty of Economics and Management, National University of Malaysia, MALAYSIA
Keywords: Tax Compliance, Tax Learning, Tax Education, Self-assessment System, Inland Revenue Board of Malaysia

Abstract

The self-assessment system has become the key administrative approach for personal and corporate taxation in developed and developing countries, including Malaysia, first implemented in 2001 for companies, followed by individual taxpayers in 2004.  It is one of the most significant transformations in Malaysia’s taxation, which requires higher tax awareness and improvements in voluntary tax compliance, especially for individual taxpayers.  The present paper attempts to uncover the role of compliance strategies in increasing tax compliance and reveal the importance of tax learning and education, one of the central focuses of the tax authority in Malaysia.  The study examines three Inland Revenue Board Malaysia’s (IRBM) current strategies: the threat of punishment, tax learning and education, and interaction with the tax authority.  From a survey of 501 respondents, the results suggest that IRBM’s two current strategies (threat of punishment and tax learning and education) have a significant positive relationship with tax compliance behaviour among individual taxpayers.  In addition, this study proposed enhancing tax learning and education by using current technology in delivering tax knowledge efficiently and embedding tax syllabus in schools and universities.  The findings of this study provide significant and valuable input to the tax authorities, particularly IRBM, in evaluating current compliance strategies with the mission to cultivate tax compliance behaviour.

Downloads

Download data is not yet available.

References

A. Razak, R., Shukor, Z. A., & Ahmad, N. (2012). The effect of tax audit and investigation activities on individual tax compliance: evidence from Malaysia. Malaysian Accounting Review, 11(1), 123–153.

Alm, J. (2018). What motivates tax compliance? Journal of Economic Surveys, 00(0), 1–36.

Ayres, I., & Braithwaite, J. (1992). Responsive regulation: Transcending the deregulation debate. Oxford University Press.

Chiarini, B. & Marzano, E. (2019). A strategic approach for the crime of tax evasion. Journal of Financial Crime, 26(2), 477-487.

Devos, K. (2013). Role of sanctions and other factors in tackling international tax fraud. Common Law World Review, 42, 1-22.

Enachesu, J., Olsen, J., Kogler, C., Zeelenberg, M., M.Breugelmans, S. & Kirchler, K. (2019). The role of emotions in tax compliance behavior: A mixed-methods approach. Journal of Economic Psychology, 74, 1-16

Faizal, S. M., Zaini, R. M., & Somasundaram, N. R. (2021). Tax awareness and tax knowledge of students at secondary school level in Malaysia. International Business Education Journal, 14(1), 65–70.

Feld, L.P., & Frey, B.S. (2007). Tax compliance as a result of a psychological tax contract: The role of incentives and responsive regulation. Law and Policy, 29(1), 102-120.

Hai, D. O. T., & See, L. M. (2011). Behavioral intention of tax non-compliance among sole proprietors in Malaysia. International Journal of Business and Social Science, 2(6), 142-152.

Hair, J. F., Black, W. C., Babin, B., & Anderson, R. E. (2013). Multivariate Data Analysis, A Global Perspective. Pearson Prentice Hall.

Hassan, N., Nawawi, A., & Puteh Salin, A. S. A. (2016). Improving tax compliance via tax education - Malaysian experience. Malaysian Accounting Review, 15(2), 243–262.

Ibrahim, I., & Pope, J. (2011). The viability of a pre-filled income tax return system for Malaysia. The Journal of Contemporary Issues in Business and Government, 17(2), 85–101.

Income Tax Act. (1967). Kuala Lumpur, Malaysia.

Inland Revenue Board of Malaysia. (2016). Annual Report 2016.

Inland Revenue Board of Malaysia. (2017). Annual Report 2017.

Isa, K. (2014). Tax complexities in the Malaysian corporate tax system: Minimise to maximise. International Journal of Law and Management, 56(1), 50–65.

Josephine, H. (2013). Enforcement trend and compliance challenges: Malaysia’s experience. The Fourth IMF-Japan High-Level Tax Conference for Asian Countries, 35.

Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Education and Psychological Measurement, 30, 607–610.

Kurniawan, D. (2020.) The influence of tax education during higher education on tax knowledge and its effect on personal tax compliance. Journal of Indonesian Economy and Business, 35(1), 57-72.

Kwok, B. Y. S., & Yip, R. W. Y. (2018). Is tax education good or evil for boosting tax compliance? Evidence from Hong Kong. Asian Economic Journal, 32(4), 359–386.

Loo, E. C., Evans, C. C., & McKerchar, M. A. (2012). Challenges in understanding compliance behaviour of taxpayers in Malaysia. Asian Journal of Business and Accounting, 3(2), 145–161.

Lopez-Luzuriaga, A., & Scartascini, C. (2019). Compliance spillover across taxes: The role of penalties and detection. Journal of Economic Behavior and Organization, 164, 518-534.

Machogu, C. G., & Amayi, J. B. (2013). The effect of taxpayer education on voluntary tax compliance among SMEs Mwanza City-Tanzanite. International Journal of Marketing, Financial Services & Management Research, 2(8), 12–23.

Mahmood, M. (2012). Compliance risk management strategies for tax administrations in developing countries: A case study of the Malaysian revenue authority. PhD Thesis, The University of Warwick.

Ministry of Higher Education. (2017.). Annual Report 2017.

Mohamad, M., Mohd Nor, N., Bakar, N., & Nanta, W. L. (2013). Accounting vs. non-accounting majors : perception on tax knowledge, fairness and perceived behavioural control. International Journal of Asian Social Science, 3(9), 1887–1896.

Mohdali, R., Isa, K., & Yusoff, S. H. (2014). The impact of threat of punishment on tax compliance and non-compliance attitudes in Malaysia. Procedia - Social and Behavioral Sciences, 164 (2014), 291–297.

Murphy, K. (2008). Enforcing tax compliance: To punish or persuade ? Economic Analysis and Policy, 38(1), 113–135.

Mohd Yusof, N. A., Lai, M. L., & Yap, B. W. (2014). Tax non-compliance among SMCs in Malaysia: tax audit evidence. Journal of Applied Accounting Research, 15(2), 215–234.

Niemirowski, P., & Wearing, A. (2006). Do Australian Taxation Office staff and compliant taxpayers identify with tax from the same perspective, or are there significant degrees of separation? Journal of Australian Taxation, 9(2), 119–171.

Okafor, O. N., & Farrar, J. (2021). Punishing in the public interest: Exploratory Canadian evidence pertaining to convictions and incarcerations for tax offences. Journal of Accounting and Public Policy, 1-25.

Palil, M. R. (2010). Tax knowledge and tax compliance determinants in self assessment sSystem in Malaysia. PhD Thesis. The University Of Birmingham.

Palil, M. R., Hamid, M. A., & Hanafiah, M. H. (2013). Taxpayers compliance behaviour: Economic factors approach. Jurnal Pengurusan, 38, 75–85.

Rillstone, J. (2015). Rewarding taxpayers : A possible method to improve tax compliance in New Zealand ? Master Thesis. The University Of Canterbury.

Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill-building approach. John Wiley and Sons Inc.

Sritharan, N., Salawati, S., & Cheuk, S. C. S. (2020). How social factor determine individual taxpayers’ tax compliance behaviour in Malaysia? International Journal of Business and Society, 21(3), 1444–1463.

Tabachnick, B. G., & Fidel, L. S. (2013). Using multivariate statistics. Pearson Education.

Verboon, P., & van Dijke, M. (2007). A self-interest analysis of justice and tax compliance: How distributive justice moderates the effect of outcome favorability. Journal of Economic Psychology, 28(6), 704–727.

Yee, C. P., Moorthy, K., & Soon, W. C. K. (2017). Taxpayers’ perceptions on tax evasion behaviour: An empirical study in Malaysia. International Journal of Law and Management, 59(3), 413–429.

Yunus, N., Ramli, R., & Hassan, N. S. A. (2017). Tax penalties and tax compliance of small medium enterprises (SMEs) in Malaysia. International Journal of Business, Economics and Law, 12(1), 81–91.

Published
2022-06-10
How to Cite
Abu Hassan, N. S., Palil, M. R., Ramli, R., & Maelah, R. (2022). Enhancing Tax Compliance in Malaysia: Does Tax Learning and Education Matter?. International Business Education Journal, 15(1), 18-29. https://doi.org/10.37134/ibej.vol15.1.2.2022