Cash economy: tax evasion among SMEs in Malaysia

Purpose – The purpose of this study is to investigate the relationship between tax evasion and certain demographic factors such as location, engagement of tax agent, size and type of small- and medium-sized enterprises (SMEs) industry in Malaysia. Design/methodology/approach – In this study, usin...

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Bibliographic Details
Main Authors: Mohamad, Azhar, Zakaria, Mohd Hasrol, Hamid, Zarinah
Format: Article
Language:English
English
Published: Emerald Group Publishing Ltd. 2016
Subjects:
Online Access:http://irep.iium.edu.my/55059/1/Cash%20economy_%20tax%20evasion%20amongst%20SMEs%20in%20Malaysia.pdf
http://irep.iium.edu.my/55059/7/55059_Cash%20economy_SCOPUS.pdf
http://irep.iium.edu.my/55059/
http://www.emeraldinsight.com/journal/jfc
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Summary:Purpose – The purpose of this study is to investigate the relationship between tax evasion and certain demographic factors such as location, engagement of tax agent, size and type of small- and medium-sized enterprises (SMEs) industry in Malaysia. Design/methodology/approach – In this study, using proprietary tax audit data from the Inland Revenue Board of Malaysia (IRBM) on the 2011 tax returns of SMEs, the authors run a multiple regression analysis to examine the impact of location, agent, type of industry, size of enterprise and type of tax evasion on SMEs’ tax evasion in Malaysia. Findings – The authors find that tax evasion among SMEs in Malaysia is the highest when the business is located in a suburban environment and has no tax agent. Tax evasion is also influenced by the size of the SME (micro or medium). Originality/value – This study gives insight that the IRBM can use to aid its collection department in profiling SMEs that have a higher tendency to evade paying tax. Keywords Malaysia, SMEs, Tax evasion, Cash economy, Corporate income tax