1 CHAPTER 1: INTRODUCTION 1.0 Chapter ... - DSpace@UM

Hite & Roberts (1991) and Roberts & Hite (1994) discussed about the preferred tax ratesaying that increase in rate will increase compliance. The results by Kinsey & Grasmick(1993) were different i.e. progressive tax rate was judge unfair and chances of futurecases of tax cheating. Factors such as progressive versus proportional tax rates aresignificant variables to compliance behavior. This implies that there is difference in taxrate. In the Malaysian tax system the high income earners will fall into the higher taxbracket i.e. as the income increases the tax rate will also positively increase. According toReckers, Sanders, & Roark (1994) have stated that mildly progressive tax rate willpromote tax compliance. Their findings used ethical beliefs to test if compliance willreact to any marginal tax rate. However, the results showed not significant. The linkbetween tax rate and compliance as reported by Alm, Jackson, & Mckee (1992) is evidentfrom this study that compliance increase with lower tax rate because the ‘payoff’ benefitis greater when tax rate is larger. One other thing is that unreported income increase whenmarginal tax rate is highest.2.4.5 Dimension 5 - Self InterestEisenstein (1961) noted that judging from the ideology of equity, fairness is anindividualistic concept whereby the individual is the key determinant asking or arguingfor equity. McGowan (2000) mentioned many studies have found that self interest(defined as direct personal benefit) significantly affects taxpayers’ attitudes. Example,Hite (1990) tax shelters have direct relationship with fairness attitudes. Hite & Roberts(1991) found people with higher income believe progressive tax rate are more fair38