First 21st-anniversary celebration, Prime Minister Datuk Seri

First and foremost, for every country in the world, the payment of a tax is a legal obligation or responsibility for every citizen whether individual or corporate citizen, says Malaysia Prime minister Datuk Seri Najib Tun Razak. Therefore, as a civic duty, it is expected that citizens should freely comply with such obligation (The Star, 2017).As for Malaysia, the country first modern tax system was introduced in 1947 by the British. It was then replaced by the Income Tax Act 1967 which became only effective from January 1st, 1968 in time. Later on, the Inland Revenue Board (IRB), previously known as the Inland Revenue Department (IRD), was established as an agency for the Malaysian government to collect income taxes. However, as many other agencies that collect taxes on behalf of the government, it will have to face problems such as tax non-compliance which is a big issue in the tax system. In the taxation world, there are two types of people that do not obey with tax payment. These people are known as tax protesters and tax resisters. Tax protesters are the people that refuse to pay tax because they believe that tax laws are unconstitutional or invalid, while tax protesters are more concerned with not paying for particular government policies that they oppose (Burg, 2004).Technically, taxation provides a predictable and stable flow of revenue to fund development objectives. In Malaysia, the tax system has been a key factor for the development of the country. According to the Star (2017), at the Inland Revenue Board (LHDN)’s 21st-anniversary celebration, Prime Minister Datuk Seri Najib Tun Razak congratulated the board for collecting RM114 Billion in individual and corporate taxes for the 2017 year which is considered as positive for the country tax system. Additionally, the main purpose of taxation is to raise revenue for government expenditure (Davies, et al., 2012). However, despite many positive impacts on the tax system, tax non-compliances still exist and are serious challenges in many countries and which Malaysia is no exception. Tax non-compliances are long-standing issues that have plagued revenue authorities around the world.Tax non-compliances according to Wenzel (2002) are defined as illegal misreporting activities or non-compliant behaviors that are ominous with the tax law and administration applicable at one particular time. Tax non-compliances include tax avoidance, which is the lawful means of tax reduction and as well as tax evasion, which is the criminal non-payment of tax liabilities. However, both tax avoidance and tax evasion led to the reduction of tax liability which can push a government revenue into a loss. Moreover, the both have similar negative effects on the national revenue of a country (Otusanya, 2011). James and Alley (2004) added that a tax non-compliance is a failure of the taxpayer to meet tax obligations, irrespective of whether it is committed intentionally (in which taxpayers purposely undermine the tax rules and regulations for their personal benefits) or unintentionally (which could be as a result of ignorance, or oversight). In another word, they referred to it as the “unwillingness of individuals to act in accordance with both the spirit and the letter of the tax law and administration without the application of enforcement activity at one particular time” James and Alley, (2002).  Additionally, Roth et al. (1989), mentioned that “tax non-compliance happens through failure to file the tax return, misreporting income or misreporting allowable subtraction from taxable income or tax due (exemptions, deductions, adjustment, tax credit etc)”. Tax non-compliances are affected by different factors and that depends on each country. In Malaysia, three (3) main factors are considered to be the reasons for tax non-compliance by taxpayers. This reasoning here elaborates those factors affecting tax-non-compliance and steps that should be taken to minimize the level of tax noncompliance among taxpayers in Malaysia.   

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