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Evaluation of corporate income tax compliance costs under the Malaysian self-assessment system


This paper presents the findings of the first study carried out in 2010 on the compliance costs of Malaysian corporate taxpayers under the self-assessment system (SAS) environment. We used a self-administered survey method on 473 large companies and received 98 usable responses, which represented a response rate of 20.7%. The mean compliance costs estimate of a company for the year of assessment 2009 is MYR47,126 (AUD15,340), accounting for approximately 1% of sales turnover. The mean estimate from this study is 31.5% lower when compared to the findings of a similar Malaysian pre-SAS study. The components of compliance costs are segregated into internal and external costs (37% and 63%, respectively), and computational and planning costs (74% and 26%, respectively).

The aggregated total compliance costs are almost MYR32 million, representing 0.11% of corporate tax revenue and 0.01% of Malaysian gross domestic product (GDP). The magnitude of the corporate income tax (CIT) compliance costs estimate is low compared to similar estimates in other advanced and emerging economies, partly portraying a lower level of complexity in the Malaysian tax system. The costs of seeking tax incentive and psychological costs comprise approximately 7% and 18%, respectively, of the mean tax compliance costs incurred by large corporations. The normal regressivity of tax compliance costs, in relation to company size, is evident and corroborates the findings of existing studies on the unfair compliance costs burden imposed on smaller corporations.

This study provides useful information to tax authorities and others concerned with establishing guidelines and tax policy pertaining to the compliance
costs burden of taxpayers.

Author profiles:

Noor Sharoja Sapiei
Noor works for University of Malaya, Malaysia.
Current at 1 April 2014

Jeyapalan Kasipillai
Jeyapalan is a Professor, School of Business, Monash University, Malaysia. Current at 04 July 2016 Click here to expand/collapse more articles by Jeyapalan KASIPILLAI.
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