The Relationship Between Perceptions And Level Of Compliance Under Self Assessment System – A Study In The East Coast Region

There are three major theoretical perspectives on tax compliance. The first theory perceived that tax compliance is deterred by sanction (Title, C. 1980). Second Theory perceived tax compliance as purely economic decision (Allingham & Sandmo, 1972), while the third theory suggested that tax compliance is determined by non economic factor such as demographic attributes, attitudes and perception towards taxation. In this study, we try to understand tax compliance by using the third model (Kinsey, 1986). Hence, the objectives of this study are (1) to examine the relationship between satisfaction towards the services provided by the Inland Revenue Board (IRB) and tax compliance; (2) to examine the relationship between knowledge on taxation and tax compliance; and (3) to determine factors that contributed to the satisfaction towards the services provided by the IRB. Satisfaction towards the services provided and knowledge on taxation are the independent variables of this study, meanwhile tax compliance, which being measured by timeliness of submitting the tax return is the dependent variables. In addition, 9 point Likert Scale questions have being used to measure the level of satisfaction. Meanwhile, to measure the respondents’ knowledge on taxation, 10 questions on taxation are given, and the respondents need to state whether the answer is ‘True’ or ‘False’. 300 questionnaires were distributed to sole proprietors in three states in East Coast Region. In return, we received 199 responses from the respondents, which results to 66.3% response rate. By using Cross tabulation, the result indicates that there are relationship between satisfaction and tax compliance, where out of 10 questions given, 4 questions on satisfaction are significantly correlated with tax compliance. Furthermore, Chi- square analysis also indicates that there is correlation between tax knowledge and tax compliance. In addition, factor analysis conducted depicts that 3 questions contributed to the level of satisfaction, which are overall satisfaction towards the services provided by the IRB, satisfaction towards the time taken to process the tax return, and the time taken to process the tax refund. However, this study cannot be generalized to all the taxpayers in Malaysia, since it was conducted in three states only