Abstract
The Goods and Services Tax (GST) implementation in Malaysia has received mixed reactions from various parties such as businesses, policy makers, professionals, business associations and individuals. Despite the rejections from these parties, the government proceeded with implementing GST. On consequence, this has led to GST compliance issues. One of the issues that have been highlighted is high compliance cost. To address this issue, various Government Support Programs (GSPs) have been implemented in Malaysia particularly financial and credit assistance. Therefore, this study aims to determine the effect of GSPs on GST compliance among batik manufacturers in Malaysia. In addition, this study also examines the relationship between compliance cost in terms of fiscal cost, time cost and psychological costs on GST compliance among Malaysian batik manufacturers. Data was collected through a structured survey among Malaysian batik manufacturers. Based on the finding, the result showed that GSPs, time cost and psychological cost do affect GST compliance while fiscal cost did not affect GST compliance among batik manufacturer. The findings in this study provide awareness to the government on the need of more GSPs and other incentives to the batik manufacturers in order to encourage them to comply with GST.
Highlights
The Goods and Services Tax (GST) implementation in Malaysia has raised many arguments from various parties including Small and Medium Enterprises (SMEs)
The primary aims of GST are to increase the efficiency of the tax collection system from previous Sales and Service Tax (SST) as well as become a major source of indirect income to the government in order to finance the socioeconomic development in Malaysia
Population and Sample The population of this study consists of 823 batik manufacturers located at Kelantan and Terengganu who registered with Perbadanan Kemajuan Kraftangan Malaysia (PKKM)
Summary
The Goods and Services Tax (GST) implementation in Malaysia has raised many arguments from various parties including Small and Medium Enterprises (SMEs). SMEs contribute a significant amount of revenue to Malaysia as they are the largest business population representing 97.3% out of 645,136 businesses. It contributes 36.6% of GDP, 65.5% of employment and 17.6% on trade export. The primary aims of GST are to increase the efficiency of the tax collection system from previous Sales and Service Tax (SST) as well as become a major source of indirect income to the government in order to finance the socioeconomic development in Malaysia. According to Chebusit et al, (2014), GST non-compliance issues can give negative impact on the economy where it can decrease tax revenue of the country. Taxpayers non-compliance behaviour are due to several factors such as high compliance cost, inadequate knowledge on technical aspects of income tax system and taxpayers’ attitudes and perceptions (Palil et al, 2013; Saad, 2013)
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