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Introduction
The tax system and taxes are fundamental components of any attempt for a developing country such as Malaysia (McKerchar and Evans, 2009). Tax is a means of financing government expenditures and is an important component in a government’s revenue (Tabandeh et al., 2013). Tax compliance has always been an area of concern to policy makers, tax administrators and society in general (Isa, 2014). Tax resistance can happen through either tax evasion or tax avoidance (Kasipillai et al., 2003). Tax evasion is different from tax avoidance. Every Malaysian has his/her own right to tax avoidance, while tax evasion is generally viewed as unacceptable on the grounds that it is illegal, as it involves intentional non-compliance of tax law. Taxpayers’ compliance has a positive linkage with their perceptions of the tax system (Kogler et al., 2013; Schwartz, 2014). Acceptability perception can be defined as a person’s moral or duties on a particular thing.
Although the tax evasion law has been enforced in Malaysia, the number of tax evasion cases is in an increasing trend, as reported by the Chief Executive Officer of Inland Revenue Board, Malaysia, in the Annual Reports of Inland Revenue (2008/2012) (Table I).
It is impossible to achieve 100 per cent compliance of tax regulations in all countries (McGee et al., 2008). It is a concern and challenge for all governments and tax authorities, as it is impossible to convince all taxpayers to meet the terms and guidelines of the tax system, as the commencement of income tax collection (James and Alley, 2002). Several future research avenues still exist to improve the understanding of the determinants of tax evasion worldwide (Khlif and Achek, 2015). Hence, efforts have to be taken to increase tax compliance from taxpayers. Taxpayers’ perception on tax evasion is highly questionable in Malaysia. Obviously, taxpayers’ perception of the severity of tax evasion is an essential element. The probability of evading tax is there when taxpayers think that tax evasion is reasonable, and some will justify based on moral ground (Nickerson et al., 2009). Besides, taxpayers’ attitude on tax morality, such as inequitable tax laws and poor tax administration could be among the reasons for non-compliance of tax amongst taxpayers (Odd-Heldge, 2005). Thus, an enhanced understanding...