This study investigates the standing of Malaysian tax schemes for SMEs compared to 17 countries across continents and economic classification. The analysis was qualitatively performed using content analysis based on canons of taxation. Upon determining the position and area of improvements of the schemes, this study investigates the SMEs’ willingness to pay more income tax and the factors that contribute to the observed willingness. The data for these objectives was collected using 5-likert scale questionnaires distributed to 1,000 SMEs across the country, which the sampling was determined using geographical stratified of systematic random sampling method. Given the low number of usable responses, i.e., 77 questionnaires, the OLS estimation was used to analyse the data. The findings indicate that the SMEs’ willingness to pay more tax is at a slightly more than the neutral level. The factors that affect the willingness to pay more tax are, perception on effectiveness of tax system, perception on effectiveness of tax administration, and knowledge and understanding of tax regulations and incentives. The perception on effectiveness of tax system, and knowledge and understanding of tax regulations and incentives explain the willingness to pay more tax in a positive direction while perception on effectiveness of tax administration affects the willingness to pay more tax negatively. The findings support theory of reasoned action and optimal trust model. In addition to contributions to literature, this study also contributes to practice by highlighting the area of improvements of Malaysian tax schemes for SMEs and the factors that warrant the authority’s focus if the SMEs are to encourage to pay more income tax.

Research Team:
Assoc. Prof. Dr. Nor Shaipah Abdul Wahab
Dr. Nik Herda Nik Abdullah
Assoc. Prof. Dr. Zaimah Zaino Ariffin

Institute:
Taylor’s University
Universiti Utara Malaysia

To access the short research report for this topic, please got to:
https://eknowledge.mia.org.my/mia/purchase.html#1