Tax Evasion Behavior among Salaried Worker in Malaysia: A Socio-Psychological Framework

Vol. 12, No. 4, 2022, Pg. 56 -


Introduction
A tax is a governmental-imposed financial charge or levy that is levied on persons or businesses. Taxes are an important source of revenue for governments, and tax revenue is used to fund government spending. Individual tax, business tax, stamp duty, real property gains tax, and sales and service tax are only a few examples of common tax classifications. Individual income tax and sales and service tax, on the other hand, are the taxes that have the most immediate impact on public. Countries in the developing world need a method for collecting enough revenue from their citizens. Due to a variety of factors, the predicted revenue cannot be increased. Tax evasion and lack of awareness creation for taxpayers are frequent in the developing world, and citizens are not dedicated to paying the expected amount of the for their countries, among the reasons tax operation of the system may not be smooth (Fagbemi et al., 2010). People pay taxes to their governments, and this is still true in today's society. Tax compliance has taken a back seat to tax avoidance and evasion as the major goal of the taxpayer as the globe has developed. Tax evasion is the practise of lowering one's tax liability by unlawful means, whereas tax avoidance is the practise of lowering one's tax liability through legal means (Alleyne & Harris, 2017). Unwanted taxation, tax evasion, and tax fraud are all threats to society, and governments and international organisations have been attempting to counteract them (Saxunova and Szarkova, 2018). Malaysia is also facing the same problem as reported in 2021, the Inland Revenue Board (IRB) of Malaysia had identified tax evaders who owed the government in total of RM800 billion (Utusan Malaysia, 2021). The cases include fail to furnish tax forms within the specified time or no submission at all. Lack of awareness in tax submission and unaware of time submission period will cause the taxpayer mistakenly understated of income and revenue related figures or inflate the deduction and expenses. The intention to evade taxes is influenced by a lack of tax understanding and a disregard for tax laws and regulations (Alwi, 2022). Thus, this is against the spirit of the Self-Assessment System (SAS) that was introduced in 2001 to educate taxpayers and make them as good citizens by becoming responsible and truthful taxpayers. Scholars, governments, and tax officials have all been drawn to the issue of tax evasion. Tax evasion has long been a problem for taxpayers (Benk et al., 2016). Given that taxes are one of the most important sources of revenue for governments, and that tax evasion has serious economic effects, a thorough understanding of the factors that influence tax evasion and compliance attitudes is critical for improving tax collection.

Problem Statement
Taxpayer noncompliance is not merely the government's fault, but also a public matter that needs to be addressed immediately. When compared to developed countries, tax evasion practises are worsening in emerging countries. Because countries are unable to manage it, tax evasion has become a pandemic. As a result, tax evasion has harmed governments' ability to improve citizens' living standards and allocate a budget for public expenditure, and it has become a disease for the country's economy, costing an estimated 20% of income tax revenue (Ameyaw et al., 2016;degl'Innocenti & Rablen, 2020;Palil, 2016). The use of E-filing has been made simple and convenient for the public at large. However, because the tax words are not easily understandable, taxpayers continue to find it difficult to use the e-filing system (Maisiba & Atambo, 2016). Since the taxpayers come from a variety of backgrounds, some of them may be illiterate (Shaharuddin et al., 2012), which may influence their compliance attitude. Due to the range and complexity of human behaviour, determining tax compliance behaviour is a difficult issue for both revenue authorities and scholars. The study defined the essential issues the authority will focus on to increase annual revenue and to educate tax payers about the destructive impact of tax evasion to demonstrate the value of this study. Furthermore, the work may provide new insights into tax evasion's crucial non-economic elements, which the researchers may emphasise in future studies. This study will also give novel approaches to understand why taxpayers engage in tax evasion and to tell the authorities about the elements that they will struggle to minimise their influence and increase revenue. The findings could be proof that the tax authority should implement novel methods to combat tax evasion.

1.
To examine the relationship between the attitude and tax knowledge 2.
To examine the relationship between the subjective norm and tax knowledge 3.
To examine the relationship between the perceived behavioural control and tax knowledge 4.
To examine the relationship between the tax knowledge and tax evasion

Research Questions
The research questions in this study are: 1. Does attitude have a relationship with tax knowledge? 2.
Does subjective norm have a relationship with tax knowledge? 3.
Does perceived behavioural control has a relationship with tax knowledge? 4.
Does tax knowledge have a relationship with tax evasion?

Literature Review Underpinning Theory
The theory of planned behaviour (TPB) is a popular theory in social psychology that attempts to explain individual actions. In terms of predicting individual behaviour, this model has gotten a lot of attention. Ajzen (1985) coined the term as an extension of the theory of reasoned action, or TRA (Fishbein & Ajzen, 1975). TPB was chosen for this study because of its widespread use in the social-psychological field for assisting in the development of human behaviour awareness and prediction. The TPB also has previously been used to predict tax behaviour intentions (Bobek and Hatield, 2003;Bobek et al., 2007). It is widely acknowledged in the literature that investigating true unethical behaviour has various challenges, including access, uncovering actual perpetrators, and possible information control (Alleyne et al., 2013). As a result, researchers have resorted to measuring (un)ethical behaviour using intended acts rather than actual behaviour. To assess ethical intentions in the past, researchers employed survey methodologies, scenarios, and instances (Bobek and Hatield, 2003;Alleyne and Phillips, 2011).

Tax Evasion
Tax evasion is a serious offence that has the ability to destabilise the country's entire economic, political, and social system. Tax evasion has an economic component that affects income distribution among residents. Tax evasion, which these individuals are barred from doing due to unfair competition, is another social cause that creates various social groups (AlAdham et al., 2016). Tax evasion is a sort of illegal activity in which a taxpayer reduces the amount of tax he or she pays. Possibly, the country's legislation will support taxpayers who have engaged in tax evasion (Kim, 2008;Putra et al., 2018;Allingham & Sandmo, 1972).

Attitude
Attitude is the sum of a person's positive and negative judgements of their possessions, and it motivates them to act on them (Ajzen, 1991;Fishbein & Ajzen, 1975). A taxpayer with a favourable attitude toward tax evasion is less likely to be compliant, according to Alabede et al (2011), but a taxpayer with a favourable attitude toward tax rules is more likely to be compliant. Attitudes and behavioural intentions tend to be linked in tax compliance research. As a result, this research will evaluate the attitudes of internet business owners in order to determine whether or not they are in conformity with tax requirements. As a result, while assessing the level of compliance among Malaysian internet business owners, the attitude toward e-filing should still be considered.
H1: There is a relationship between attitude and tax knowledge among taxpayers in Malaysia

Subjective Norm
Norms are one of the most important determinants of behavioural intention (Ajzen, 1991). Numerous studies have shown that norms have a strong influence on an individual's behaviour. Normative perspectives on the appropriateness of social obligation are linked to core personality traits, attitudes, beliefs, and thought processes, according to (Mudrack, 2007). Subjective norms have garnered a lot of attention in behavioural research. This variable focuses on societal pressure to engage in a particular behaviour. Long-term socialisation techniques foster societal expectations that are based on core beliefs (Kornhauser, 2007). When someone in a person's circle has power over them, they are more likely to behave in a certain way. Individual motivation is required for specific actions to be completed in order to meet expectations. As a result, behaviour will be influenced when another individual has a desire.
H2: There is a relationship between subjective norm and tax knowledge among taxpayers in Malaysia

Perceived Behavioural Control
Perceived behavioural control is a function of control beliefs, according to the TPB model, and refers to people's perceptions of their capacity to do a specific behaviour (Ajzen, 2002). In other words, an individual's belief in their ability to complete a task drives their behaviour (Ajzen, 1991). Individuals who believe they can master a specific skill or activity are more likely to perform that skill or activity. When a person has both the ability and the motivation to do a certain behaviour, it is possible for that behaviour to occur. Perceived affordances (Li et al., 2002), self-efficacy and convenience/availability (Olsen, 2004), and knowledge are some of the skills (Kim et al., 2014;Maichum et al., 2016). H3: There is a relationship between perceived behaviour control and tax knowledge among taxpayers in Malaysia

Tax Knowledge
Many researchers have given attention to the important of tax knowledge in order to gain the taxpayer compliance behaviour. The higher level of taxpayer knowledge will highly impact the extent of compliance with taxation policy and regulation (Kasipillai & Jabbar, 2003;Kirchler et al., 2006). The uncertainty of tax regulation can lead to a higher level of unintentional non -compliant without any intent to avoid tax (Latiff et al., 2005). According to Palil (2016); Saad (2014) tax knowledge refers to the taxpayer understanding of tax law, tax rate, tax structure and ability to determine the tax liability accurately. It is in line with Fallan (1999) defined tax knowledge as information which relates to tax regulations and fiscal knowledge and the information is used to calculate economic consequences for taxpayers. Meanwhile, Nero and Amrizah (2005) describe tax knowledge as taxpayer awareness of tax issues and possess high understanding of tax term. By having the knowledge, the taxpayers are able to determine their own tax liabilities without assistance. H4: There is a relationship between tax knowledge and tax evasion behaviour among taxpayers in Malaysia

Research Methodology
This study covers Malaysian personal taxpayers who are salaried or wage earners and have experiences in filing their income tax return. A non-probability sampling will be the adopted for this study. This study adopts a quantitative approach using primary data. Data collection has been done by using a survey questionnaire instrument. The survey questionnaire has been adopted and adapted from previous studies. The questionnaire consists of two parts which are respondents' profiles and variables. All independent variables and the dependent variable are measured by using a 5-Likert scale from strongly disagree to strongly agree. There was a total of 24 observed variables constituted of the exogenous variables and the endogenous variable measurement. Subjective norm construct consists of 4 measurement items (Alleyne & Harris, 2017), attitude consists of 7 measurement items (Alleyne & Harris, 2017), perceived behavioural control constructs consist of 4 measurement items (Alleyne & Harris, 2017), tax knowledge construct consists of 6 measurements (Hastuti, 2014) and tax evasion intention construct consists of 5 measurement items (Alleyne & Harris, 2017). A fivepoint Likert scale was employed ranging from strongly disagree to strongly agree to measure the measurement items of each construct. 250 responses were collected and adequate to conduct data analysis by employing the structural equation modeling technique (SEM). After data screening and deleting the outliers process, 204 questionnaires were cleared and ready to be analysed. Table 1 demonstrated the respondents' profiles of the sampled Malaysian personal taxpayers. Smartpls4 was used in this study to run the multivariate data analysis, test the proposed hypotheses and model measurement and structural model assessment.
The PLS-SEM technique was employed for this study due to its assessment ability (Hair, Black, Babin, & Anderson, 2010).

Measurement Model
The proposed structural model was assessed and verified for measurement item reliability and validity by using the PLS-SEM algorithm. According to Hair et al (2017), two important elements in PLS-SEM are reliability and validity for the study of the outer goodness model. First, the specified model was presented (Figure 1). Then, the evaluation of the measurement items was done to confirm the reliability and validity of the outer loadings and it was found that some items of the constructs showed low loadings. This causes construct reliability and validity where the average variance extracted (AVE) is below the threshold of 0.5. Therefore, it requires certain items that have a low loading to be removed. After the items with low loading were removed, all constructs succeeded in reaching the threshold of AVE of a minimum of 0.5. with the range of 0.607 to 0.842 (Table 1). This has confirmed convergent validity for all constructs successfully achieved. Composite reliability as shown in Table 1 ranged from o.885 to 0.926 where all exceed the threshold of 0.7 as suggested by Hair et al. (2017). Further convergent validity was performed by evaluating the Fornell-Larcker Criterion (Fornell & Larcker, 1981) and the result has shown that all the correlations of the respective constructs were lower than the AVE-square root along the diagonal (Table 2). Next, the evaluation of discriminant validity was performed to confirm its presence in this study by evaluating measurement items cross-loadings. The statistical results clearly show that all item loadings are higher than their respective cross-loadings (Table 1). Confirmation of the presence of discriminant validity is then done and evaluated by making calculations. Hetrotrait-Monotrait (HTMT) ratios and the statistical results show that all constructs' ratios are < 0.9 (Table 3) as proposed by (Henseler, Ringle, & Sarstedt 2015). Therefore, as mentioned by Hair, Hult, Ringle & Sarstedt (2014), this study has proven the latent constructs' reliability and validity.

Structural Model
Evaluation of the structural model is done by evaluating the path coefficient (ß) together with the coefficient of determination (R2) value (Hair et al., 2012). The partial least square (PLS) technique was used to bootstrap 5000 sub-samples to determine the path coefficient significance level. The hypotheses testing of path coefficients (Beta), t-values, and p-values statistical results were presented in Table 4. For hypothesis 1, the statistical result shows attitude has a positive and significant influence on tax knowledge (ß = 0.415, t = 5.312, p=0.000), hence H1 is supported. For hypothesis 2, the result reveals that perceived behavioral control has a positive but no significant influence on tax knowledge (ß = 0.048, t = 0.555, p=0.579), thus, H2 is not supported. For hypothesis 3, the statistical result confirms that social norm has negatively and significantly affected tax knowledge (ß = -0.222, t = 3.084, p=0.002), hence, H3 is supported. For hypothesis 4, it is found that tax knowledge has a positive and significant direct effect on intention (ß = -0.294, t = 4.254, p=0.000), therefore, H4 is supported. The summary of the hypotheses testing results is presented in Table 4.

Discussion and Conclusion
This study looks at the importance of attitude, perceived behavioural control, social norm and tax knowledge on taxpayers from the viewpoint of personal taxpayers Malaysia which are examined empirically based on a theoretical research model. In this study, an assessment was made on key determinants, namely attitude, perceived behavioural control, social norm, and tax knowledge and the implication on tax evasion. The main purpose of this study is to investigate the direct and indirect relationship between attitude, perceived behavioural control, social norm, and tax knowledge and as a result of statistical data analysis, the proposed model explains that attitude has been found to have a positive and significant direct relationship on tax knowledge (ß=0.415). Therefore, it is very important for tax authority to formulate a strategy to ensure that the attitude among individual in Malaysia can be increased so that it will have an impact and strengthen their tax knowledge, thus lower the tendency of tax evasion, as well to comply with the tax regulations. Next, although it is not statistically significant (ß = 0.048), perceived behavioural control was found to have a direct positive relationship on tax knowledge. As a result of the positive direct relationship, perceived behavioural control is considered as crucial since it indicates a person's trust in their ability to adhere to tax regulations and their level of tax knowledge. The results of this study demonstrate that subjective norms have had a negative and significant impact on tax knowledge (ß = -0.22). To prevent tax evasion for Malaysian individual taxpayers, actions must be done to help them uphold society standards, which will in turn affect their behaviour. Finally, from the statistical data analysis conducted, it was found that tax knowledge has a positive and significant effect on tax evasion intention (ß = -0.294). This results clearly show tax knowledge is very important to ensure the individual taxpayer comply to taxation policy and regulation. As such, the tax authority needs to formulate and plan to strengthen the tax knowledge so that tax evasion can be avoided.
With this proposed model, it can be concluded that all the proposed variable, attitude, perceived behavioural control, social norms and tax knowledge play an important role in this study in the context of individual taxpayers. This finding will benefit future studies by combining these components in the tax compliance literature because it has been proven from various perspectives, including tax evasion concerns. The major theoretical contributions in this study are, first, the operationalization and test of the theoretical model that connects existing constructs from tax literature. Then, address the existing research gap by examining and finding empirical evidence for each construct in the context of individual taxpayers. The results of the empirical study from the presented model have some practical implications for the tax authority, IRB and the accounting literature perspective. For future studies, other variables that may have an influence on tax compliance behaviour can be tested such as personality or gender. Future research also may use other data collection method such as interview which might give difference outcomes and to incorporate qualitative studies for specific target sample. In conclusion, this study provides preliminary work that shows the importance factors that may influence individuals in Malaysia to engage in tax evasion. This offers potential research and practical implications for tax administration and the tax authority.