Determinants of Enforced Tax Compliance: Empirical Evidence from Malaysia

Abstract

This study examines the determinants of enforced tax compliance behavior of Malaysian citizens where trust in tax authorities is assumed to be a mediator. Quota sampling method was used to select a sample of 340 participants to participate in a survey. A two-step structural equation modeling (SEM) process was adopted to test a framework comprising 13 hypotheses. Model fit was initially measured using confirmatory factor analysis (CFA) while model specification was applied in the second stage to test the structural relationship. The mediating effects of trust in tax authorities were tested via Baron and Kenny (1986) approach, bootstrapping, and AMOS AxB estimand. The findings confirmed that trust in government, trust in tax administrator, power of Inland Revenue Board of Malaysia, and awareness influence enforced compliance. However, tax morale and tax amoral behaviors do not influence enforced compliance. The findings suggest that citizens would fulfill their tax responsibilities if they believe that tax authorities are effective in tax administration. Trust in government fosters trust in the tax authorities. This study contributes to existing literature by confirming the factors that affect enforced tax compliance.