The pricing of audit services: evidence from the Kuala Lumpur Stock Exchange (KLSE) listed companies

In practice, audit fees are determined based on agreement, negotiation and consensus between auditee and auditor. With the exception of the Malaysian Institute of Accountants' schedule for determining minimum audit fees, no specific guideline has been issued either by the Malaysian government or other accounting bodies. This study examined the explanatory power of previously identified factors that could influence the pricing of audit services in the Malaysian setting. The factors examined included the size of company (measured either by total assets or turnover), complexity of company (measured by the number of the companies in the same group, i.e., holding, as well as subsidiaries), profitability, liquidity and leverage of auditees, audit opinion, size and location of the auditors, audit season, audit delay, and classification of the industries in which the auditees operate. Consistent with previous studies, the size and complexity of the audited companies were found to be the major determinants of audit fees

Complexity of the Malaysian Income Tax Act 1967: Readability assessment

This study which examines the readability of the Income Tax Act 1967 (ITA 1967) and its associated Schedules is considered important as the materials are the main references for taxpayers who have intention to comply with their tax obligations.Using FRES and F-KGL analysis, it is found that the ITA 1967 and its Schedules are complex to understand. The findings indicate that the materials under study may need to be rewritten. It is hoped that the findings will contribute not only to the body of knowledge but also to the tax authority

Public policy, political connections, and effective tax rates: Longitudinal evidence from Malaysia

This study examines the link between effective tax rates (ETR) and political connections in developing economies. The political connections explanation is informed by the observation that developing economies tend to be “relationship-based” rather than “market-based” capitalisms. Two proxies of political patronage are developed and applied to a group of Malaysian firms over a 10-year period. We find firms with political connections pay tax at significantly lower effective rates than other firms. Our results suggest that political connections are an important determinant of ETR in relationship-based economies

Capital structure and political patronage: The case of Malaysia

This paper extends prior work on the links between political patronage and capital structure in developing economies.Three proxies of political patronage are developed and applied to a group of Malaysian firms over a 10-year period.We find a positive and significant link between leverage and each of the three measures of political patronage.We also find evidence of an indirect link between political patronage and capital structure through firm size and profitability

Challenges of tax revenue generation in developing countries: adopting the carrot and stick approach

The study reiterates the challenges of tax revenue generation in developing countries.While the advanced countries have traditionally performed well in tax revenue generation, developing countries continue to perform poorly. This accounts for the economic development challenges faced by these countries.The study identifies tax noncompliance as a key factor for the current under performance of tax revenue in developing countries.However, there are over sixty variables associated with tax noncompliance in existing literature and this could lead to confusion in the effort to tackle noncompliance.There is need to streamline existing variables by identifying the key ones in the context of developing countries. This study advocates for the carrot and stick model in tackling the challenges of tax compliance in developing countries.The study further identifies socioeconomic condition, citizen engagement and tax service quality as constituting the carrot factors while audit and sanction constitute the stick factors. It argues that an optimal mix of the carrot and stick factors will go a long way in tackling the tax revenue challenges of developing countries

DTPB as a Better Voluntary Tax Compliance Predictor - A Comparison Study

Tax administrators have been trying to maximise its voluntary tax compliance rate where e-filing system has been the preferable compliance tool by taxpayers in submitting their income tax return forms. Despite the effort to provide better services to taxpayers, the heterogeneous taxpayers in Malaysia face difficulties in extracting information and tax knowledge that would require assistance or advice from other sources, like their peers and mass media, while some may have financial difficulties. This comparative study proposes to utilise the multidimensional model of Decomposed Theory of Planned Behaviour (DTPB) that incorporates general tax knowledge, mass media referent, and ability to pay as addition to the original DTPB model. The findings showed that general tax filing knowledge, mass media referent, and ability to pay have significant influence on intention to comply with tax laws. However, perceived usefulness, perceived ease of use, compatibility, and self-efficacy were found to be not significant when the DTPB model was adopted. Nevertheless, it is advantageous to use the DTPB model that provides predictiveness and explanation toward understanding voluntary tax compliance behaviour. This model is useful as a guide for improving voluntary tax compliance rates while promoting the advantages of using e-filing system as the preferable tool for compliance

What Is Wrong With the Fiscal Social Contract of Taxation in Developing Countries? A Dialogue With Self-Employed Business Owners in Nigeria

Contemporary societies are bound in a fiscal social contract between citizens and their elected governments who administer the states in the interest of all members.The fiscal social contract implies that citizens should pay tax which is utilized by government to execute programs for the collective good.While the advanced countries have done a better job of mobilizing tax as a resource for societal development, developing countries have performed poorly.A large number of high income earners in developing countries avoid the tax system thus hampering development efforts. Previous studies have alluded to a culture of tax evasion among citizens of developing countries as a key factor influencing noncompliance.However, this study argues that these studies did not reach the best conclusion as their methodology excluded the taxpayers’ narratives. We interviewed self-employed taxpayers in Nigeria’s capital city, Abuja.Results of the analysis revealed taxpayers’ frustration with an opaque tax system, deplorable socioeconomic condition, and non functioning of the tax audit system.We argue that the massive tax noncompliance in developing countries may be better understood as “tax boycott” arising from taxpayers’ frustration with the fiscal social contract of governance.Policy implications of the findings were discussed in the concluding section

The influence of normative beliefs on tax-payers attitude and voluntary tax compliance intention

As technology advances, individuals will utilise the gadgets in their daily processes. However, individuals may still require views from their peers and other people surrounding in making decisions. The views formed would affect the individual’s attitude towards their actions. This study was administered to understand the influence of normative belief on taxpayers’ attitude towards voluntary tax compliance intention using the Theory of Reasoned Action (TRA). A total of 311 responses were obtained from the survey conducted remotely online, which was analysed using Smart PLS 3.0 software. The attitude (ATT) construct was decomposed into several dimensions of general tax filing knowledge, compatibility, perceived ease of use, perceived usefulness, and subjective norm. Interestingly, the study found that normative belief, which was measured using the dimension of the subjective norm, has a significant influence on attitude. Similarly, it was found that general tax filing knowledge does significantly influence attitude. However, the dimensions of compatibility, perceived ease of use, and perceived usefulness were found to be insignificant. In conclusion, the study recognises that technologies play an essential role in individuals’ attitude on tax compliance. Nevertheless, the views of peers and tax knowledge do have an impact on taxpayers regardless of the compatibility and usefulness of the systems when it comes to the voluntary tax compliance intention

The complexity of the Malaysian income tax laws: Do we need the rewriting programme?

Complexity of the income tax system is viewed from various perspectives, including the readability of the legislations.Having said that, this study examines the readability of the Income Tax Act 1967 (ITA 1967), its Schedules and Public Rulings issued from the year 2000 to 2013 with the aim to understand the level of readability of such tax documents.This is important since those materials are considered as the main references for taxpayers who are intended to comply with their income tax obligations.Using the four readability measures, namely Flesch Reading Ease Index, Flesch Kincaid Grade Level, average sentence length and percentage of passive sentences, it is found that the ITA 1967, its Schedules and Public Rulings are complex to understand.The findings indicate that the materials under study may need to be rewritten following the exercise of other countries such as the United States of America, Australia and New Zealand.It is hoped that the findings will contribute not only to the body of knowledge but also prompt the tax authority to review the existing income tax legislations