DETERMINANTS OF FACTORS INFLUENCING TAX AVOIDANCE IN PREPARING FINANCIAL STATEMENT AMONG SME TAXPAYERS

Abstract

The tax avoidance cases in Malaysia increased year by year. The tax avoidance led to country revenue under collected. Therefore, this study aims to investigate the factors that lead to tax avoidance among SME taxpayers in Penang, Malaysia. The study is performed by adopting the Approach-Avoidance Theory model. This model widely used to explain the decision making by the taxpayers to involve in tax avoidance activities. The framework of the study focused on four level factors namely tax complexity, tax compliance costs, tax rate and government transparency spending and tax education and tax knowledge. The objectives of this study are to determine the level and the relationship of tax complexity, tax compliance costs, tax rate and government transparency spending and tax education and tax knowledge and tax avoidance. This study employed the quantitative method by distributing the surveys to the SME taxpayers in Penang state. The total sample of this study was 420 respondents. Collected data were analyzed by using SPSS statistic version 25. As a result, the findings from the regression analysis revealed that tax complexity, tax compliance costs and tax education and tax knowledge significantly on the tax avoidance activities among SME taxpayers in Penang state. However, the study discovered that there is an insignificantly relationship between tax rate and government transparency spending with tax avoidance activities in Penang state. The results of this research are used to develop awareness among the SME owners and to reduce the tax avoidance cases in Penang, Malaysia.