Cash economy: tax evasion amongst SMEs in Malaysia
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
Acknowledgements
The authors thank the Operational and Compliance Department of the Inland Revenue Board of Malaysia for providing the data.
Citation
Mohamad, A., Zakaria, M.H. and Hamid, Z. (2016), "Cash economy: tax evasion amongst SMEs in Malaysia", Journal of Financial Crime, Vol. 23 No. 4, pp. 974-986. https://doi.org/10.1108/JFC-05-2015-0025
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited