Tax Compliance Behavior Among Malaysian Taxpayers: A Dual-stage PLS-SEM and ANN Analysis

Abstract

The tax system provides the necessary financial resources to a country’s administration to use the collected resources for the welfare of the general public and the development of general infrastructure. Therefore, compliance with the prevailing tax system is necessary for a country’s political and administrative system to survive. The current study aims to explore the intention to comply and the compliance behavior toward the tax system among Malaysian taxpayers. The data were collected using the survey method, and quantitative data were analyzed using the dual-stage methods of partial least squares structural equation modeling (PLS-SEM) and artificial neural network (ANN). The analysis results showed that the perceived fairness of the tax system, tax penalties, and tax awareness were significantly related to the intention to comply with the tax rules and regulations. Furthermore, the intention to comply with the tax system significantly influenced tax compliance behavior. The ANN analysis confirms that tax awareness, tax penalties, and fairness perception are the three most important factors influencing tax compliance. The tax authorities need to build the taxpayers’ confidence in the prevailing tax system and streamline the tax system to reduce tax complexity. Consequently, the taxpayers will start paying the correct and timely tax liabilities. The study’s limitations and future research avenues are documented at the end of this paper.

Factors Influencing Tax Compliance From The Perspective Of Young Workers: Evidence From Malaysia

“…In addition, an individual's decision to comply with tax rules and regulations may be influenced by their perception of the level of control they have over the behaviour. Nevertheless, the finding was in contrast to Hayat et al (2022) who found that taxpayers in Malaysia did not comply with tax regulations due to a lack of perceived civic duty and discomfort with paying taxes on time and in full.…”

“…Imposing higher penalties is an effective way to discourage noncompliant attitudes towards taxes (Mohdali et al, 2014). Tax penalties can serve as a deterrent to encourage taxpayers to comply with the tax system (Hayat et al, 2022). However, previous research has demonstrated that legal enforcement techniques, such as tax fines, may not ensure tax law compliance (Murphy, 2008).…”

What determines the tax compliance intention of individual taxpayers receiving COVID-19-related benefits? Insights from Indonesia

“…Neither direct ( β = 0.005, p > 0.1) nor indirect effects ( β = 0.006, p > 0.1) were found to be insignificant, while the size of the effects was found to be very small. These findings did not support previous studies (Kaulu, 2022; Youde and Lim, 2019; Hayat et al. , 2022).…”

“…In addition, their level of compliance is influenced by their impression of whether those with similar incomes are exposed to the same tax burden. This confirms what other research has shown across various contexts (Hayat et al. , 2022; Inasius, 2019a; Jimenez and Iyer, 2016; Lois et al.…”

“…Neither direct (β 5 0.005, p > 0.1) nor indirect effects (β 5 0.006, p > 0.1) were found to be insignificant, while the size of the effects was found to be very small. These findings did not support previous studies (Kaulu, 2022;Youde and Lim, 2019;Hayat et al, 2022). This could also be a sign that when things get tough, people become more realistic, prioritizing their basic requirements to survive the pandemic, which can undermine their tax awareness.…”