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<strong>CHAPTER</strong> 2: LITERATURE REVIEW2.0 <strong>Chapter</strong> OverviewThis chapter will take the reader through the literature on tax compliance, definition oftax fairness, impact of perceptions of tax fairness towards tax compliance, dimensions oftax fairness, and demographic factors and its impact on tax compliance. The discussionwill then try to relate the association between impacts of tax fairness as an independentvariable of tax compliance. The paragraph that follows will discuss on tax compliance.2.1 Tax ComplianceTax compliance means obeying tax laws. According to Singh (2003), the definition of taxcompliance is an action by a person filing his Income Tax Form (or usually referred asReturns), declaring all taxable income accurately, and disbursing the payable tax withinthe stipulated time without getting the tax authority to keep reminding or taking actionagainst those noncompliance taxpayers. Roth et al. (1989) stated that compliance withreporting requirements means the taxpayer files all required tax returns at the proper timeand that the returns accurately report tax liability in accordance with the Internal RevenueCode, regulations, and court decisions applicable at the time the return is filed.Noncompliance refers to not abiding the tax laws. The types of noncompliance; Firstly,the case of filing; the noncompliance refers to non filing of returns to the tax authority16
will lead to tax gap i.e. the amount of unpaid taxes due foregone. Second, the nonpayment compliance refers to untimely taxes paid, that means payment not made in atimely manner to the tax authority. Timely tax payment is important to the tax authority.The dues received now will be used for the government’s expenditure otherwise theinsufficient fund needs to be borrowed and incur additional cost. Thirdly, issue onnoncompliance and tax underreporting. This is considered a criminal offence thatimposes severe penalty. The taxpayer practices no reporting by way of evasion and alsoavoidance, both are same except that the later is legal while the former is illegal. Thisarea of noncompliance poses a serious problem to tax authority because these taxpayersescape tax and their burden is pushed to the other complying taxpayers. This is where thefair and equitable tax system is questionable.Andreoni et al. (1998) referred the magnitude of evasion being the tax gap which is thedifference between the federal income taxes households actually owe, and what theyreport and pay voluntarily on a timely basis but is mainly concerned with tax evasion asthe central part of the tax gap definition. As mentioned earlier taxpayer compliance is amulti-faceted measure. Brown & Mazur (2003) stated that theoretical definition oftaxpayer compliance consists of ‘three mutually exclusive and exhaustive measures’.payment compliance, filing compliance and reporting compliance. There are manypredictors for tax compliance from the economic to the non economic factors. Theeconomic factors are detection and punishment, harsh enforcement, burden of taxationwhereas the non economic factors as mentioned by Alm, Sanchez & Ana (1995) arebehavioural in nature. Fiscal psychological factor is an important element in tax17
Page 4: noncompliance which means not repor
Page 10 and 11: individuals that push for tax fairn
Page 12 and 13: Following from hypothesis H1 - H5,
Page 14 and 15: 1.6 Limitations of the StudyThe fin
Page 18 and 19: compliance research and numerous ta
Page 20 and 21: stated crime is an industry where m
Page 22 and 23: 2.2 Definition of Tax FairnessThe l
Page 24 and 25: Distribution in tax fairness refers
Page 26 and 27: elief, and evaluation between pragm
Page 28 and 29: elief that unfairness in the tax sy
Page 30 and 31: elevance of knowing the attitudes o
Page 32 and 33: It has been admitted by many resear
Page 34 and 35: significant results. The reasons gi
Page 36: unfair and also their exchange with
Page 39 and 40: (vertical equity) or in other words
Page 41 and 42: Jackson & Milliron (1986) found tha
Page 43 and 44: differences. Therefore the findings
Page 45 and 46: study education which is a noncompl
Page 47 and 48: CHAPTER 3: METHODOLOGY3.0 Chapter O
Page 49 and 50: Table 3.1: Reversed Coded Items on
Page 51 and 52: 3.2 Sampling DesignA non probabilit
Page 53 and 54: correlations and multiple regressio
Page 55 and 56: the four Federal Territory IRB bran
Page 57 and 58: analysis was carried out. Firstly,
Page 59 and 60: Table 4.3: Mean and Standard Deviat
Page 61 and 62: factor analysis was considered appr
Page 63 and 64: paid is fair to himself). Based on
Page 65 and 66: dependent variables but having the
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4.5.2 Correlation Matrix 2 between
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4.6.1 H1: There is a positive assoc
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The second predictor which was sign
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analyzed in Model 3a and 3b to know
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Model 3a band 3b was specifically t
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CHAPTER 5: CONCLUSIONS AND RECOMMEN
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taxes they pay, and may not be payi
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in the pay statements and they have
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service announcements such as, tele
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BIBLIOGRAPHYAllingham, M., & Sandmo
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Fallan, L. (1999), “Gender, expos
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Mazur, M. .J. & Plumley. A. (2007),
Page 92 and 93:
Singh, V. (2003), “Tax Compliance
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