Tax knowledge and tax compliance determinants in self assessment

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Based on Table 6.15, estimated regression showed that estimated coefficient for constant, B2, B3, B6, B7 and B8 were statistically significant at 1% level (p value < 0.01). The B3 and B8 variables had a positive effect on tax compliance while B2, B6 and B7 had a negative relationship with tax compliance. Results implied that taxpayers with good knowledge about responsibilities, child relief and rebates tend to be non compliant with negative coefficient .53, .12 and .12 respectively. On the other hand, taxpayers with good knowledge of employment income and awareness of offences, penalties and fines tend to be more compliant. Table 6.15 : Stepwise multiple regressions - tax knowledge and tax compliance hypothetical questions (TCHYP) Variables Coefficient t Sig. 320 Tolerance VIF Constant 23.184 22.901 .000 B2 - TNRES -.532 -10.466 .000 .963 1.038 B6 - TNCHILDREL -.119 -4.291 .000 .792 1.262 B3 - TNEMPLOY .106 4.028 .000 .960 1.042 B8 - TNAWARE .121 2.830 .005 .952 1.050 B7 - TNREB -.112 -2.757 .006 .788 1.269 Model fit: R .419 R 2 .176 Adjusted R 2 .172 Std. error 4.24 Note: TCHYPi = α + β1TNRESi + β2TNEMPLOY i + β3TNDIVINT i + β4TNPERSREL i + β5TNCHILDRELi + β6TNREB i + β7TNAWARE i + β8 TNTOTAL i + ε i Where: TCHYP i TNRES i TNEMPLOY i TNDIVINT i TNPERSREL i - Tax compliance score (hypothetical questions) - Tax knowledge about responsibilities and rights - Tax knowledge about employment income - Tax knowledge about dividend and interest - Tax knowledge about personal relief TNCHILDREL i - Tax knowledge about child relief TNREB i - Tax knowledge about rebates TNAWARE i - Tax knowledge about awareness of offences, penalties and fines TNTOTALi - Total tax knowledge score
The estimated coefficient of correlation (R = 0.419) and the estimated coefficient of determination, (R 2 = 0.176) indicate a linear correlation between tax knowledge and tax compliance. The F statistic stand at 43.15, (p = 0.000) was substantiated at 1% significance level, implying that the null hypothesis that the regression coefficient are all zeros can be rejected at 1% level of significance. The result also revealed that there was no multicollinearity among the independent variables. The tolerance indexes were between .78 and .96 while the Variance Inflation Factor (VIF) was also low and ranged between 1.04 and 1.27. 6.6.2. Summary of results of Stage 2 – Relationship between tax knowledge and tax compliance. Results suggest that tax knowledge had a significant impact on tax compliance both in direct and hypothetical questions, and consequently support the HS2 hypothesis (Tax knowledge is positively associated with attitude towards tax compliance behaviour). Filling the gap as suggested by Eriksen and Fallan (1996) this study suggested that knowledge about employment income, awareness of offences, penalties and fines, taxpayers’ responsibilities and rights, child relief and rebates, appears to be significantly correlated with tax compliance behaviour, thus rejecting the null hypothesis (refer 5.4.2.2 – HS2). Discussion of results in Stage 2 appears in Chapter 7. Figure 6.7 summarises all tax knowledge variables that affect tax compliance. 321
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TAX KNOWLEDGE AND TAX COMPLIANCE DE
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ABSTRACT Self assessment system (SA
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DEDICATION To my late father, fathe
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TABLE OF CONTENTS Abstract ii Dedic
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2.6 SELF ASSESSMENT SYSTEM - A CONC
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4.3.5.1 Age 214 4.3.5.2 Income leve
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6.3 RESPONDENT BACKGROUND 288 6.4 I
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TO TAX ADMINISTRATORS 392 8.4 LIMIT
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LIST OF TABLES Table 2.1: SAS intro
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independent variables. Table 6.14:
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1.1 INTRODUCTION CHAPTER 1 INTRODUC
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Efficiency refers to how the tax au
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(US) and the United Kingdom (UK) we
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and Lundstedt, 1976), gender (Vogel
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Revenue Board Malaysia (IRB). The s
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constitutional elective monarchy (f
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countries. Despite similar capitali
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development on tax compliance resea
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conclusions about what the Malaysia
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could provide new insights to the I
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ecome more aware of their tax oblig
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“ future research can explicitly
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The result of this study will contr
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and stepwise multiple regressions.
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CHAPTER 2 SELF ASSESSMENT SYSTEMS-
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Table 2.1: SAS introduction in coun
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with postwar democratic thought (Ki
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Formal System. Table 2.2 summarises
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To reduce the possibility of taxpay
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This could be aided through continu
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of the tax system (Eriksen and Fall
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have a good and reasonable knowledg
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compliance, many taxpayers perceive
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had a low significant impact on com
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2.4 HOW SELF ASSESSMENT IS OPERATED
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keeping as well as the perceived le
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issues still remain important and c
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Table 2.4: United States’ complia
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In 1944 a new income tax system was
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assessment system, to overcome thes
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of the amounts deducted by employer
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Notes: Table 2.9 - United Kingdom-
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were quite difficult to complete. M
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In conclusion, tax development in t
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• Individual income tax has a min
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2008). E-Tax (e-filing) was also in
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Self-assessment in Japan has gradua
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administrations and their perceptio
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In terms of personal income tax, th
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Although more operations are becomi
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Table 2.16: OECD Self-assessed Coun
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it is acknowledged that wide variet
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deemed to be the amount of tax liab
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Tax and compliance costs remain a c
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) Sri Lanka Income tax in Sri Lanka
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Table 2.21: Tax development in Sri
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Table 2.23: Sri Lanka - Tax revenue
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information which is related to tax
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assessed, they represented only 67
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(d) applicable to ‘white return
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Sources: OECD (2007:124) (OECD in F
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COUNTRY Table 2.27: Aggregate Admin
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United States Table 2.28: Enforceme
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Malaysia impose a penalty percentag
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2.5.5.3 Electronic filing Table 2.3
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Table 2.31: SAS - Tax Education in
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and to speed up tax collections tha
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Peninsular Malaysia is separated fr
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ITA consolidated the three acts of
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3.4 PERSONAL INCOME TAXES IN MALAYS
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3.4.4 Basis year Section 2 of the I
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eturn (refer Appendix 4). A separat
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Table 3.1: List of deductions for Y
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c) Amount of zakat 61 payment. The
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Having discussed how personal incom
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A new system, known as the Self Ass
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igger increase in 2006 too), a sign
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1) Married woman were required to f
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Table 3.6: A brief comparison on th
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impact upon total revenue. Table 3.
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(STD) 67 audits and 4) investigatio
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Centres (RSCs) in Perak, Selangor,
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planned and implemented special tra
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sufficiently ‘educate’ taxpayer
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which netted RM226.05 million in ta
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In the next chapter, I will discuss
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compliance including age, gender, l
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isks of non-compliant behaviour the
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The wider perspective of tax compli
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Table 4.1: Approach to tax complian
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Figure 4.1: Compliance Index in Ind
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Table 4.2: Tax compliance index int
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Table 4.3: Tax compliance in transi
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Kasipillai et. al. (2003), Lewis (1
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7. GDP per capita, 8. tax system, 9
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Singapore 6.00 8.18 Slovakia 2.62 2
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Given evidence that tax knowledge a
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The result of the study suggested t
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there is insufficient knowledge abo
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taxpayers who read an objectively p
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In conclusion, after taking into co
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4.3.1.1 Tax rates This subsection d
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2008) and increasing tax rates will
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The result also evidenced that the
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4.3.1.4 Summary This subsection dis
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Roth et. al. (1989) suggested that
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simplified the range of guidance th
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potentially could help taxpayers to
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probability) using three major data
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whole population of North Carolina,
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factors in taxpayer compliance, nam
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likely to occur (Allingham and Sand
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y the government and the prices reg
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4.3.3.4 Referents groups (family an
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and referent groups. In the followi
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Table 4.5: Relationship between fin
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evading tax and the consequences of
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Table 4.6: Some previous studies on
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4.3.5.2 Income level Jackson and Mi
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Table 4.7 : Some previous studies o
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4.3.5.3 Culture Chan et. al. (2000)
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avoidance (UA) and masculinity (MAS
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are not aiming to become accountant
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2003 Hasseldine and Hite Female tax
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eferent groups) because these facto
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5.1 INTRODUCTION CHAPTER 5 RESEARCH
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Using a sample from a telephone dir
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income. However, the total of indiv
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taxpayers had gone through filing p
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2004 Ming Ling, Obid and Meera 2003
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5.2.2 The respondents Like Spicer a
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independence particularly from any
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X be chosen. Respondents are asked
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probability’ to ‘very high prob
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Loo (2006) used a mixed method appr
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questions’ approach was based on
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‘extremely good’, ‘good’,
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5.4.1.2 Data analysis technique T-t
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5.4.2.2 Hypotheses development for
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The association between tax knowled
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TNAWARE i - Tax knowledge about awa
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A. Demographics control variables (
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B. Tax background control variables
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5.4.3.3 Data analysis techniques In
Page 289 and 290: The role of Inland Revenue Board (E
Page 291 and 292: H4B- Positive perception of governm
Page 293 and 294: Besley, Preston and Ridge (1997) re
Page 295 and 296: In agreement with Spicer and Lundst
Page 297 and 298: improved through better tax knowled
Page 299 and 300: EQUITY i - Perception on equity and
Page 301 and 302: H5B - With regard to other tax comp
Page 303 and 304: used. A wider coverage of tax knowl
Page 305 and 306: 6.1 INTRODUCTION CHAPTER 6 ANALYSIS
Page 307 and 308: total population of Malaysia, parti
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Page 311 and 312: 500 400 300 200 100 0 333 1,001- 2,
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Page 315 and 316: 6.5.1 T-tests, Mann-Whitney U. and
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Page 321 and 322: 6.5.2 One-way ANOVA, post hoc test
Page 323 and 324: Non-parametric test, KW and median
Page 325 and 326: (B6) (F= 3.1113, p < 0.01) and reba
Page 327 and 328: IV IV A5 (RM) 10000 A5 (RM) 10000 A
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Page 331 and 332: KW tests also suggested that there
Page 333 and 334: Figure 6.6 illustrates the results
Page 335 and 336: Table 6.12: Summary and relationshi
Page 337 and 338: Table 6.13: Stage 2 -Pearson correl
Page 339: Table 6.14 : Stepwise multiple regr
Page 343 and 344: low correlation (p
Page 345 and 346: A. Dependent variable TCHYP Table 6
Page 347 and 348: TCHYP 40:60 = α + β1TNRESi + β2T
Page 349 and 350: B. Dependent variable TCDIR Table 6
Page 351 and 352: TCDIR 0 = α + β1TNRESi + β2TNEMP
Page 353 and 354: EQUITY and TOTAL were significantly
Page 355 and 356: 6.8.2 Factors affecting tax complia
Page 357 and 358: GROUP i - Referent group ROLEi i -
Page 359 and 360: 6.8.4 Summary results of Stage 4 Ta
Page 361 and 362: Table 6.25: Stage 5 -Pearson correl
Page 363 and 364: Note: Panel B: (Constant) 20.773 9.
Page 365 and 366: 6.9.2 Dependent variable - TCDIR Ta
Page 367 and 368: Table 6.28 (Panel B) suggests that
Page 369 and 370: Notes: *** Significant at 0.01 leve
Page 371 and 372: subject matter. Most researchers vi
Page 373 and 374: ANOVA test results were sufficientl
Page 375 and 376: Table 6.33: Tax compliance direct -
Page 377 and 378: Table 6.35: Tax compliance hypothet
Page 379 and 380: Table 6.37: Results summary Results
Page 381 and 382: 7.1 INTRODUCTION CHAPTER 7 DISCUSSI
Page 383 and 384: eason why the CRA emphasised the
Page 385 and 386: As this study suggested that tax kn
Page 387 and 388: and Hudson, 2002; Wearing and Heade
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of being audited, perceptions of go
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Braithwaite et. al. (2009). In addi
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In relation to this finding (financ
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cultivating personal awareness of c
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With regard to age, this result sup
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CHAPTER 8 CONCLUSIONS Self assessme
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This study seeks to contribute to t
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Like many countries, implementing a
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identified the tax compliance deter
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Further analysis (refer to section
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middle income earners) for tax admi
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latest information on tax regulatio
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8.4 LIMITATIONS It is acknowledged
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espondents regarding tax compliance
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Bank Negara Malaysia (2006). Annual
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Chow, C.Y. (2004). Gearing up for t
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Fishbein, M., and Ajzen, I. (1975).
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Inland Revenue Board (IRB) Malaysia
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Lempert, R. (1988). Internal Revenu
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Moriaryty, S. (1998). Tax complianc
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Shoven, J. (1989). The Japanese tax
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Vogel. J. (1974). Taxation and publ
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APPENDIX 1 Section 13. General prov
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shall be deemed to be derived from
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year of assessment (the responsibil
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APPENDIX 4 FORM BE 2007 FOR INDIVID
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Name Tax Reference No. PART C : STA
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Name Tax Reference No. PART F: STAT
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for for for for for reference refer
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GENERAL INSTRUCTION. This survey is
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ii) What is the probability of comp
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The following income MUST BE INCLUD
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SECTION C (TAX COMPLIANCE) Please s
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D11. Designation (Grade for governm
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