Tax knowledge and tax compliance determinants in self assessment

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Table 6.18 - OLS regressions results (dependent variable TCDIR) Panel A: Coefficient t Sig. VIF (Constant) 48.497 16.039 .000*** TNRES (B2) .604 4.088 .000*** 1.207 TNEMPLOY (B3) -.043 -.429 .668 2.084 TNDIVINT (B4) -.122 -1.316 .188 2.095 TNCHILDREL (B6) .329 3.263 .001*** 2.370 TNREB (B7) .236 1.715 .087* 2.042 TNAWARE (B8) -.120 -.755 .450 2.087 TNTOTAL (B1) .125 2.044 .041** 8.241 Model fit: R .358 R 2 .128 Adjusted R 2 .121 Std. error 11.02 F statistic 19.91*** Panel B: (Constant) 56.663 9.949 .000*** TNRES (B2) .725 5.198 .000*** 1.074 TNEMPLOY (B3) .114 1.537 .125 1.118 TNDIVINT (B4) -.012 -.185 .853 1.083 TNPERSREL (B5) .166 2.660 .008*** 1.181 TNCHILDREL (B6) .408 5.427 .000*** 1.311 TNREB (B7) .336 3.009 .003*** 1.340 TNAWARE (B8) .101 .877 .381 1.101 GENDER 1.215 -1.611 .099* 1.112 INCOME -1.770 -4.049 .000*** 1.517 AGE -.043 -.179 .858 1.374 EDUCATION .035 .089 .929 1.188 COURSE -1.143 -1.198 .231 1.062 AUDITED .207 .103 .918 1.034 Model fit: R .386 . R 2 .149 Adjusted R 2 .137 Std. error 10.953 F statistic 12.56*** Note: * Significant at p < 0.10 ** Significant at p < 0.05 *** significant at p < 0.001 330
TCDIR 0 = α + β1TNRESi + β2TNEMPLOY i + β3TNDIVINT i + β4TNPERSREL i + β5TNCHILDREL i + β6TNREB i + β7TNAWARE i + β8 TNTOTAL + β9 GENDER i + β10INCOME i + β11AGE i + β12EDUC i + β13 COURSE i + β14AUDITED i + ε i Where: TCDIR - Tax compliance score (direct questions) TCDIR i - Tax compliance score (direct questions) TNRES i - Tax knowledge about responsibilities and rights TNEMPLOY i - Tax knowledge about employment income TNDIVINT i - Tax knowledge about dividend and interest TNPERSREL i - 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 GENDER i - Gender INCOME i - Income level of the taxpayer AGE i - Age EDUC i - Education level COURSE i - Experience of attending tax courses - Experience of being audited by the tax authority AUDITED i 6.7.2 Summary results for Stage 3 Therefore, Table 6.19 summarises the results of Stage 3. Discussion of these results is described in Chapter 7. 331
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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
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The role of Inland Revenue Board (E
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H4B- Positive perception of governm
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Besley, Preston and Ridge (1997) re
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In agreement with Spicer and Lundst
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improved through better tax knowled
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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 and 340: Table 6.14 : Stepwise multiple regr
Page 341 and 342: The estimated coefficient of correl
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Page 345 and 346: A. Dependent variable TCHYP Table 6
Page 347 and 348: TCHYP 40:60 = α + β1TNRESi + β2T
Page 349: B. Dependent variable TCDIR Table 6
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
Page 389 and 390: up with education programmes that c
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Page 393 and 394: Braithwaite et. al. (2009). In addi
Page 395 and 396: In relation to this finding (financ
Page 397 and 398: cultivating personal awareness of c
Page 399 and 400: 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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