Essay on Tax Compliance

4479 Words Feb 28th, 2013 18 Pages
TAX COMPLIANCE: AN ANALYSIS ON TAX KNOWLEDGE AND DEMOGRAPHIC FACTORS
Noor Suhaila Shaharuddin (2012) & Mohd Rizal Palil (PhD). Tax Compliance: An Analysis On Tax Knowledge And Demographic Factors.
ABSTRACT
Empirical research on tax compliance has shown that knowledge of taxation is essential as determinants of tax behavior. In other words, to be tax compliant individual taxpayers need to possess some basic knowledge on personal taxation such as chargeability of income, exemptions, reliefs, rebates in order to compute tax liability correctly. Taxpayers are less compliant if they do not understand the basic concept of taxation. Thus, the purpose of this study is to examine the effect of tax knowledge in understanding the tax
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It was the taxpayers’ statutory duty to declare all the necessary income and expenses for a year of assessment and submit the completed returns to the IRB. Based on the information provided by the taxpayers on their taxable income and allowable expenditure, the IRB will compute the tax liability and inform the taxpayer of such amount payable. Under this system, it is assumed that taxpayers do not possess the necessary knowledge to compute their tax payable.

In contrast, under SAS, the onus for assessing tax liability has shifted to taxpayer (Junainah, 2002). That is, the new system require the taxpayers to determine their taxable income, compute their tax liability and submit their returns based on existing tax laws issued by the tax authorities. The self calculation of the tax liability is deemed accurate until the tax return is selected for verification by the tax authorities. They are also required to provide record that they may be reasonable to verify the returns submitted to IRB (Kasipillai, 2009). The introduction of SAS required taxpayers to possess adequate tax knowledge and understand the tax laws to fulfill their tax obligations voluntarily (Loo and Ho 2005). Empirical research on tax compliance has shown that tax knowledge is an essential aspect in determining taxpayer’s

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