Corporate Tax Administration in Malaysia: Managing and Improving Compliance

Abstract

These tax administration and compliance incur significant costs respectively to the authority and taxpayers. Administrative costs are more complicated to be theorised due to their discontinuity and parallel directions with tax rates. Compliance costs, on the other hand, have been hypothesised to be positively associated with complexities, reliance on tax agents, SAS and pace of change in tax system. This explains the rise of tax compliance cost as a consequence of complicated tax systems or policy. By analysing the data hand-collected from IRBM’s (Inland Revenue Board of Malaysia) annual reports, this study draws inferences about the parallel relationship between administration costs and tax revenue. This study also finds little evidence on tax collection incremental effects of IRBM’s visit events. These findings motivate future studies to investigate the institutional determinants of the effectiveness of tax administration. From the authority context, in addition to the existing risk measurements, the IRBM should further assess the potential noncompliance of firms based on firm-specific characteristics and firm corporate governance conduct.