Tax knowledge and tax compliance determinants in self assessment

A study in Malaysia conducted by Loo and Ho (2005) examined salaried individual
competency in SAS but limited their sample to individuals who pay taxes in and prior to
2003 and who are likely to pay taxes in and after the year of 2004. Tax knowledge was
measured in terms of chargeable income, exemptions, reliefs, rebates and tax credits. By
using a survey of 250 questionnaires 83 , the study concluded that although the respondents
have tertiary education, their tax knowledge in relation to personal taxation was
considered to be relatively low thus making them ‘incompetent and not ready to exercise
appropriate compliance under self assessment regime’ (Loo and Ho, 2005: 53).
Furthermore, Eriksen and Fallan (1996) suggested that a taxpayer should be given better
tax knowledge to improve perceptions of fairness, tax ethics and attitudes to others’ tax
evasion and thus suggesting that:
“…a successful means of preventing tax evasion is to provide more tax
knowledge to larger segment of society in order to improve tax ethics and
people’s conception of the fairness of the tax system. “
“…it would be a step in the right direction to make teaching in tax law and tax
knowledge a compulsory part of social science teaching in the schools.”
180
Eriksen and Fallan (1996: 399)
83 A total of 106 usable questionnaires were used after excluding those who employed in banking, finance
and insurance industries, professionals in accounting, tax, legal and corporate secretarial. The reason why
these groups of respondents were excluded was to obtain a genuine finding as these respondents by virtue
of the nature of their occupations require high levels of tax knowledge.