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Cash economy: tax evasion amongst SMEs in Malaysia

Author

Listed:
  • Azhar Mohamad
  • Mohd Hasrol Zakaria
  • Zarinah Hamid

Abstract

Purpose - The purpose of this study is to investigate the relationship between tax evasion and certain demographic factors such as location, engagement of tax agent, size and type of small- and medium-sized enterprises (SMEs) industry in Malaysia. Design/methodology/approach - In this study, using proprietary tax audit data from the Inland Revenue Board of Malaysia (IRBM) on the 2011 tax returns of SMEs, the authors run a multiple regression analysis to examine the impact of location, agent, type of industry, size of enterprise and type of tax evasion on SMEs’ tax evasion in Malaysia. Findings - The authors find that tax evasion among SMEs in Malaysia is the highest when the business is located in a suburban environment and has no tax agent. Tax evasion is also influenced by the size of the SME (micro or medium). Originality/value - This study gives insight that the IRBM can use to aid its collection department in profiling SMEs that have a higher tendency to evade paying tax.

Suggested Citation

  • Azhar Mohamad & Mohd Hasrol Zakaria & Zarinah Hamid, 2016. "Cash economy: tax evasion amongst SMEs in Malaysia," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 23(4), pages 974-986, October.
    • Handle: RePEc:eme:jfcpps:jfc-05-2015-0025
    DOI: 10.1108/JFC-05-2015-0025
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