An exploratory study on the perceptions of tax fairness among Malaysian individual taxpayers’ and tax compliance behaviour

Abstract

Tax compliance literature has recognized that perceptions of tax fairness as one of the most important variables that can influence tax compliance behaviour. Based on previous research tax fairness was measured in five separate dimensions: general fairness,exchange with the government, tax rate structure, self interest and special provision for the wealthy tax payers. The purpose of this study is to extend the work of Richardson (2006) done in Hong Kong to measure taxpayers’ perceptions of tax fairness towards their tax compliance behavior in Malaysia and also to find out if the same western tax fairness dimensions identified by Gerbing (1988) exist in Malaysia. A survey questionnaire was administered to registered individual taxpayers’ at the four Federal Territory IRB offices situated in Klang Valley, Kuala Lumpur. Results showed that taxpayers’ have evaluated the tax system as moderately fair and also indicated moderate tax compliance behaviour. The two significant dimensions among Malaysians are general fairness (this dimension comprises of general fairness and exchange with the government) and self interest. The implication of this study is to improve the perceptions of tax fairness among taxpayers’ in Malaysia. From a policy perspective emphasis should be given to the general fairness and exchange with government dimension to secure more compliance. More educational measures need to be developed targeting at these dimensions in particular and as a general perspective to increase taxpayers’ moral because education has the potential for increasing compliance levels.