Factors Influencing The Individual Taxpayers’ Voluntary Compliance

The global issue in the implementation of the Self-Assessment System (STS) is to achieve a satisfactory voluntary tax compliance rate. This motivates this study to investigate the factors that influence voluntary tax compliance among individual taxpayers in Malaysia. Specifically, this study examines the effects of tax knowledge, gender, age, norms, individual values and attitudes, the complexity of the tax system, fairness, tax rates and peer influence on voluntary tax compliance. The study data is gathered from a randomly selected of 101 Kuala Lumpur individual taxpayers. The results of multiple regression analysis show that only (1) gender and (2) norms, values and individual attitudes have a positive relationship with voluntary tax compliance. In conclusion, in Malaysia there is evidence that the rate of voluntary tax compliance depends on personal factors particularly gender and values, not external factors like peers or tax authorities.


Introduction
The Self Assessment System (STS) has been adopted in the US, UK, Australia, Indonesia and many other countries.It has been introduced in Malaysia back in 2001 and was a major change to the country's taxation system.It transfers the responsibility of calculating taxes from the Malaysian Inland Revenue Board (MIRB) to the taxpayers.STS was introduced with the main purpose of improving tax compliance among taxpayers as well as to improve the efficiency of the tax collection process.With this change, the MIRB can allocate more of their resources to increase tax collection efforts and also carry out taxation audits to enforce and improve compliance with STS (Singh, 2016).
Tax compliance can be understood as a situation where taxpayers are compliant in making tax payments, filing tax returns and submitting information to tax enforcement within the specified time and using the required format.Tax compliance can be voluntary or forced.Voluntary tax compliance can be defined as taxpayers cooperating with the tax system by sending correct and accurate information and subsequently paying the appropriate amount of tax.Forced tax compliance, on the other hand, is an act of tax compliance that is not voluntary but occurs due to compelling factors such as tax authority fines or tax enforcement (Baldry, 1987;Jackson & Milliron, 1986;Trivedi et al., 2003;Kirchler et al., 2008).
In Malaysia and other countries, the main problem with the implementation of STS is achieving a satisfactory voluntary tax compliance rate (Palil, 2010;Adimassu & Jerene, 2016).This problem can be reduced if the factors that determine voluntary tax compliance are clearly known, and if remedial actions are taken by the tax authority.This motivates this study to investigate the factors that can influence voluntary tax compliance among individual taxpayers in Malaysia.The specific objective of the study is to examine the effects of knowledge about taxes, gender, age, norms, values and individual attitudes, the complexity of the tax system, fairness, tax rates, and peer influence on voluntary tax compliance.The findings of this study will enhance our knowledge about the determinants of voluntary tax compliance in a developing country particularly in Malaysia.The findings also can assist the tax authority in designing an effective tax collection mechanism.

Literature Review and Hypotheses Development Tax Compliance
Compliance is a term that refers to the act of conforming with laws, instructions, and regulations by one's own will or as ordered by a certain party.Tax compliance, on the other hand, refers to the act of conforming with paying taxes, providing and sending information to tax authority within the prescribed timeframe and using the format required by law.It can be defined as the rate at which taxpayers obey the law (James & Alley, 2002).It can also be defined as the realization of tax liability by the taxpayer in an appropriate manner (Tazegul, 2016).James and Alley (2002, p. 29) said tax compliance can be voluntary or forced.If compliance occurs due to threats or harassment, it is called "forced tax compliance."Voluntary tax compliance is the actual compliance where compliance with tax laws is done without coercion by tax enforcement.

Factors Influencing Voluntary Tax Compliance
Tax Knowledge Niemirowski, et al (2002); Hofmann et al (2008) mention that a lack of knowledge about taxes can lead to mistrust and negative attitudes toward taxes, while sufficient knowledge about taxes is associated with positive attitudes towards taxes.Basically, an individual who has knowledge about taxes or is aware that tax evasion is a crime, will be less inclined to avoid paying taxes (Deyganto, 2018).Therefore, Kirchler et al (2008) said that high tax knowledge leads to high tax compliance, and low tax knowledge is associated with low tax compliance.This leads to the following hypothesis H1: Tax knowledge is positively related to voluntary tax compliance Norms, Values and Attitudes Personal norms are related to personality factors, moral reasoning, values and religion (Hofmann et al., 2008).The theory of reasoned action and the theory of planned behavior explain that attitude is one of the determinants of behavior or action (Ajzen, 1991;Kirchler et al., 2008).The attitude of an individual represents the positive or negative personal values that the individual possesses.Therefore, Kirchler et al (2008) claim that taxpayers who have a positive attitude towards tax evasion can be expected to tend to be less tax compliant.Furthermore, Lewis (1982) stated that he expected that if a person's attitude towards taxes is bad, the probability of avoiding taxes will increase.Some previous studies on tax evasion found a relationship between tax evasion and individual attitudes (Orviska & Hudson, 2002;Trivedi, Shehata, & Mestelman, 2004;Kirchler et al., 2008).The following hypothesis is therefore constructed: H2: Norms, values and attitudes are positively related to voluntary tax compliance Peer Influence Deyganto (2018) believes that there is a social bond among the community, and this bond affects individuals in terms of compliance with the tax system.Peer influence includes the influence of family members, employers, friends, and partners on an individual (Hanno & Violette, 1996;Sinnasamy et al., 2015).Kirchler et al (2008) claim that if a taxpayer believes that tax non-compliance is a common and accepted behavior among his group, he is likely to be tax non-compliant as well.Sinnasamy et al (2015) stated that previous studies on tax compliance had mixed results on the effect of peer influence.There are several studies that have found that taxpayers will avoid taxes if they believe their peers are doing it (Spicer & Becker, 1980;Sinnasamy et al., 2015).Therefore, the hypothesis is made as follows: H3: There is a positive relationship between peer influence and voluntary tax compliance

Tax Rate
The tax rate determines the amount of tax to be paid by the taxpayer to the tax authority.Logically, if the tax rate is high then the amount of tax to be paid is also high, and vice versa.Experimental studies that manipulate tax rates often find that the higher the tax rate, the higher the tax evasion (Alm et al., 1992;Collins & Plumlee, 1991;Friedland et al., 1978;Park & Hyun, 2003;Kirchler et al., 2008).This finding is supported by Hai and See (2011) who found that high tax rates cause high tax non-compliance.Most previous studies have found that there is a negative relationship between tax rates and tax compliance (Deyganto, 2018).Therefore, this study expects: H4: Tax rate has a negative relationship with voluntary tax compliance Tax System Complexity Palil (2010); Richardson (2008); Stephen (2011); Adimassu and Jerene (2016) stated that a simple tax system encourages taxpayers to voluntarily comply with the system.This is consistent with Graetz (1997) who suggested simplifying the tax system may be the most effective way to increase tax compliance as cited in (Forest and Sheffrin, 2002).Krause (2000), Pantya, et.al (2016) argue that tax regulations that are difficult to understand or ambiguous can cause tax compliance to decrease.Also, tax laws that are clear, easy to understand, and convincing can influence people to comply with taxes (Tazegul, 2016).Based on the above arguments, this study expects H5: The complexity of the tax system has a negative relationship with voluntary tax compliance Equity or Fairness Hofmann et al (2008) claim that fair tax perception is found to be highly correlated with tax compliance.This is because taxpayers expect they will benefit from the taxes paid (Hofmann et al., 2008).In addition, tax equality and justice are said to be the main things related to the tax system that have an influence on the tendency to avoid taxes (Israel, 1992;Deyganto, 2018).Furthermore, taxpayer compliance increases when they believe tax officials serve them fairly and with integrity (Faizal et al., 2017).Gilligan and Richardson (2005) claim that when taxpayers think the tax system is unfair, they do not want to comply.This is supported by Murphy (2004); Walsh (2012), who claim that tax non-compliance will increase if taxpayers do not believe that tax collection is done fairly.So, this study builds the following hypothesis: H6: Equity or fairness of the tax system is positively related to voluntary tax compliance

Gender
The gender factor has been tested for a long time, but past studies have not found a consensus about the influence of gender on voluntary tax compliance (Deyganto, 2018).According to Wahl, Kastlunger and Kirchler (2010), gender is said to not affect the intention to pay taxes significantly.This is supported by Richardson (2006); Adimassu and Jerene (2016) which also suggest that gender has no effect on tax compliance.At the same time, Hasseldine (1999); Kastlunger et al (2010) found that there is a difference between men and women, with women being found to be more tax compliant than men.This is supported by Baldry (1987), who found that women are less tax evasive than men.For the Malaysian context, this study expects H7: Gender is positively related to voluntary tax compliance2.2.8 Age Age has been found to consistently affect tax compliance rates.Previous studies such as Tittle (1980); Warneryd and Walerud (1982); Wahlund (1992); Mohani (2001) found a negative relationship between age and income tax non-compliance.Also, there are empirical studies that consistently support that there is a positive relationship between age and tax compliance (Vogel, 1974;Kastlunger et al., 2010).This shows that increasing age will be accompanied by increased tax compliance.Older taxpayers are said to have more willingness to pay taxes than younger taxpayers (Wahl et al., 2010).Only a small number of studies found that age has no relationship with tax compliance: see for example, (Deyganto, 2018).So, the hypothesis is constructed as follows:

H8: Age is positively related to voluntary tax compliance
The conceptual framework of this study is as follows Figure 1: Conceptual framework of the study

Research Method Data Collection
This study uses a questionnaire to obtain the primary data needed to test the hypotheses.Malaysian individual taxpayers are the study population, randomly selected individual taxpayers around Selangor, Kuala Lumpur, and Putrajaya are the sample of this study.Feedback is received from taxpayers as well as from non-taxpayers in this area.Time and financial constraints caused this study to choose to use a simple sampling technique (Zikmund et al., 2013).Most of the respondents are Universiti Putra Malaysia staff, acquaintances and friends of the respondents' acquaintances.

Questionnaire Design
This research questionnaire contains four sections: sections A, B, C, and D. Section A comprises questions regarding the respondents' demographics.Section B contains questions regarding factors that influence voluntary tax compliance, whereas Section C has questions regarding factors that influence required tax compliance.Section D, located at the conclusion of the questionnaire, contains questions aimed to determine if a respondent is a voluntary or forced taxpayer.A structured questionnaire was designed to measure all the variables tested.The measurement used is in the form of a nominal scale such as "YES" or "NO", an ordinal scale, for example, for questions related to the level of education, and also an interval scale from 1 to 6.Each interval scale indicates a different value, such as, scale 1 for "Strongly disagree" and scale 6 for "Strongly agree".Using a structured questionnaire entails that the answers are already provided in the questionnaire, and responders need to check the appropriate boxes.
Before the questionnaire was distributed, a pilot test was carried out on 10 respondents.The test was conducted to ensure that the research instrument was reliable, understandable, practical, and user-friendly for the respondents.The questionnaire that has gone through the pilot test is then used in the data collection process, which contains two steps.The first step is to identify the respondent and determine whether the said respondent is a taxpayer or not.Only taxpayers will be invited to participate in this study.The second step is to distribute the research questionnaire to the respondents.Questionnaires are distributed by submitting a hard copy or online (via whatsapp, email, telegram, or facebook messages).
One hundred and thirty-eight (138) sets of hard copies and links to the Google Form questionnaire were distributed and forwarded to respondents who were interested in participating in the study.Eighty-nine (89) hard copies of the questionnaire were returned with one (1) incompletely answered and seven (7) unanswered.Of the usable hard copies, only 55 are taxpayers.Meanwhile, through the Google form, 77 responses have been received.Of all these responses, only 46 were from taxpayers.Responses from the taxpayers totalled 101.

Findings Descriptive
Out of the 138 questionnaires distributed, only 101 responses were usable (reject respondents who did not respond, responses from non-taxpayers, and responses with incomplete data).There were 47 male respondents (46.5%), while there were 54 female respondents (53.5%).The majority of the respondents are aged between 40-49 years, which is 37 people (30%).This was followed by respondents aged between 30-39 and 50-59 years as many as 25 people per category (25% per category).Malays made up the majority of those who provided useful responses: 92 (91.1%), followed by Chinese (4%), Indians (3%) and others (2%).
Also, most respondents are married individuals, which is 73% (74 people).Twenty-four people (24) were single (23.8%), and three respondents were divorcees (3%).Fifty-five point four percent are bachelor's degree holders, 12.9% master's degree holders, 11.9% have a Ph.D., and the rest hold school-level certificates or are graduates.The majority or 42.9% of the respondents work related to management and clerical work, 12.9% are teachers and lecturers, 11.9% are upper, middle and lower level business managers, and the rest are professionals, technical workers and others.However, 9.9% of respondents did not disclose their occupation.
31 individuals, or 30.7% of all respondents, receive a monthly salary between RM4,001 and RM6,000.18.8% of respondents earn between RM2,001 and RM4,000 per month, while 15.8% make RM10,001 or more per month.One respondent did not disclose his total salary.Eighty-seven-point one percent of the respondents stated they were exposed to tax knowledge (88 people); the rest were not (13 people).The feedback from these 101 respondents is related to a large study about voluntary and forced tax compliance, but for this study that focuses on voluntary tax compliance, only data from 52 respondents will be analyzed.

Reliability Tests
The reliability test for the research instrument distributed during the pilot test (to 10 respondents) showed the overall result of Cronbach Alpha was 0.861.The overall Cronbach Alpha result for the questionnaire distributed during actual data collection was 0.859.Cronbach Alpha values for each independent variable during the actual data collection ranged from 0.627 (tax knowledge) to 0.858 (peer influence).Therefore, the internal consistency of each item used in this study is acceptable (Nunnally, 1967;Streiner, 2003).

Pearson Correlation
Table 1 shows the highest correlation between variables is between IV6 IV5, which is 0.605**, which is below 0.70.This situation demonstrates that there should be no possibility of a multiple correlation problem (Anderson, Sweeney, & Williams, 1996).In addition, the VIF values for all independent variables were below the specified point of 10, indicating that the multiple correlation assumption could not be detected (Pallant, 2020).Table 2 shows that the regression model can explain 33.3% of the relationship between the dependent variable and the independent variables.Adjusted R² is referenced, not R², due to the small sample size of the study (Pallant, 2020).In addition, the Durbin-Watson value d= 1.794 for voluntary tax compliance, which is between the two critical values 1.5< d <2.5 shows no autocorrelation in the data analyzed with this multiple regression.The results of the ANOVA in Table 3 above show that p for the significant value of F is less than 0.05.Therefore, this model is significant in predicting voluntary tax compliance.It also shows the regression model has less than a 0.05 probability of making wrong predictions.Finding an F value of 6.926 means that this model is compatible with the data.The results of the multiple regression analysis in Table 4 show that only three of the eight factors tested predict voluntary tax compliance -(1) individual norms, values, and attitudes, (2) the complexity of the tax system, and (3) gender.

Multiple Linear Regression Multiple regression was used to test the research hypotheses
The results of the analysis show that norms, values, and individual attitudes have a positive influence on taxpayers' willingness to comply with taxes voluntarily (p < 0.10) and this shows that hypothesis 2 is not rejected.This means that the higher an individual's norms, values, and attitudes scores, the more likely the individual is to be tax compliant.Specifically, a change in norm, value, and attitude variables by one standard deviation will change voluntary tax compliance by 0.225.This is consistent with the views of Stack and Kposowa (2006); Torgler (2006);Hofmann et al (2008), which support the idea that strong personal and religious values have a positive empirical effect on tax compliance.
The results of the analysis (Table 4) also show that gender has a positive relationship with voluntary tax compliance (p < 0.10).Furthermore, the average score for gender shows that females score higher than males (4.880 and 4.769 respectively), which explains why females are more tax compliant.A change in the gender factor by one standard deviation will change voluntary tax compliance by 0.171.This is consistent with Hasseldine (1999); Kastlunger et al (2010), who found that there was a difference between men and women and that women were found to be more compliant in terms of paying taxes.
Furthermore, Table 4 shows that there is a relationship between the complexity of the tax system and voluntary tax compliance (p < 0.05).But the results of the analysis suggest that the relationship is positive.So, hypothesis 5 is rejected.The results of this analysis are not consistent with the findings of previous studies such as Palil (2010); Richardson (2008); Stephen (2011); Adimassu and Jerene (2016), who found that a simple tax system encourages voluntary tax compliance.Table 4 shows that there is no relationship between tax knowledge, peer influence, tax rate, fairness, and age with voluntary tax compliance.

Conclusions, Implications and Recommendations
This study was made with the general objective of investigating the factors that influence voluntary tax compliance among individual taxpayers.The specific objective of the study is to examine the effects of (1) knowledge about taxes, (2) individual norms, values, and attitudes, (3) peer influence, (4) tax rates, (5) complexity of the tax system, (6) fairness, (7) gender, and (8) age on voluntary tax compliance.The results of the analysis show that only gender and the norm, individual values, and attitudes have a positive relationship with voluntary tax compliance.Female taxpayers have been found to be more tax compliant than male taxpayers.Individuals who have positive norms, values, and attitudes towards paying taxes are found to be more likely to comply with taxes.In conclusion, the rate of voluntary tax compliance is determined by internal factors such as gender and life values, rather than external factors such as peers or tax authorities.
This study found that individual internal factors such as gender and individual norms, values, and attitudes influence voluntary tax compliance.Women are more likely than men to pay taxes voluntarily.This finding indicates that, for Malaysia, the MIRB must make greater attempts to engage male taxpayers so that they tend to pay taxes voluntarily.Since the norms, values, and attitudes of individuals have a positive influence on voluntary tax compliance, the tax enforcement authorities, especially the MIRB, need to increase efforts to educate potential and existing taxpayers about the importance of paying taxes and its benefits to society and the country.Education may boost a person's willingness to voluntarily pay taxes.
In addition, this study also found that around 51% of the respondents were voluntary taxpayers, while the rest paid taxes because they had to.So, the MIRB can use the results of this study as input in efforts to improve tax compliance.To encourage and motivate taxpayers to do it voluntarily, the tax authority can make plans such as rewarding individuals who are found to be tax compliant during tax audits.MIRB can also regularly audit individuals who are slow to pay taxes and should consider imposing fines if necessary (Bornman & Stack, 2015).
The main limitation of this study was limited time and resources which precluded more extensive data collection.For future studies, it is suggested that a larger and more representative sample be used, and that more determinants of voluntary tax compliance be tested.Qualitative research methods should also be used if an in-depth explanation of concepts and/or relationships between variables is needed.

Table 1
Pearson correlation of independent variables for voluntary tax compliance

Table 2
Summary of the Voluntary Tax Compliance Model Equity or Fairness, Peer Influence, Gender differences have different levels of tax compliance., Tax Knowledge, Different age such as old and young have different levels of tax compliance., Tax rate, Norms, value and Attitudes, Complexity of tax system

Table 4
Voluntary Tax Compliance Coefficient Table