TAX COMPLIANCE AMONG SMES: A STUDY IN KEDAH MALAYSIA
DOI:
https://doi.org/10.35631/AIJBES.828031Keywords:
Small and Medium-Sized Enterprises (SMEs), Tax Compliance, Tax Knowledge, Tax Penalty, Trust in AuthorityAbstract
Small and Medium-sized Enterprises (SMEs) are significantly contributed to Malaysia’s economy as one of the revenue sources. As one of the developing countries, SMEs able to gear up the economic growth, create job opportunities, and support government revenue. As SMEs continue to develop, they will assist and facilitate the innovation process and make industries more competitive. Despite the fact that SMEs play such a big role, many of them still face challenges when it comes to act of complying with tax laws. This is due to some business owners have limited knowledge on taxation, worried about tax penalties, and lack of trust towards the authorities. These issues may affect their ability to manage finances accordingly and could discourage their ability to expand their business. Therefore, this study focuses on three main objectives. First, to identify the level of tax compliance among SMEs in Kedah. Second, to examine how factors like tax knowledge, fear of penalties, and trust in authorities affect their compliance behaviour. Third, to explore whether differences in tax filing experience influence how SMEs handle their tax responsibilities. 100 questionnaires were distributed to SME owners in Kedah using convenience sampling, and the data was then analysed using non-parametric methods namely Spearman’s Rho and the Kruskal-Wallis test to identify relationships and differences among the respondents. The results show that SMEs in Kedah generally have a moderate level of tax compliance. It was also found that tax knowledge, concerns about penalties, and trust in authorities play an important role in influencing their behaviour towards tax compliance. The Kruskal–Wallis test shows a statistically significant difference in tax compliance across different levels of tax filing experience. This study aims to provide useful insights for policymakers, particularly in improving tax education, ensuring fair penalties, and building trust on the tax authorities.
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