Cash economy: tax evasion amongst SMEs in Malaysia

Azhar Mohamad, Mohd Hasrol Zakaria and Zarinah Hamid

Journal of Financial Crime, 2016, vol. 23, issue 4, 974-986

Abstract: 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 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-05-2015-0025

DOI: 10.1108/JFC-05-2015-0025

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