Are Psychological Empowerment and Tax Transparency Related with Tax Compliance Behaviour of SMEs in Malaysia? An Empirical Approach

Abstract

The study explores the factors influencing tax compliance behaviour among small and medium enterprises (SMEs) in Malaysia. Its main objective is to examine the relationship between psychological empowerment and tax transparency on tax compliance behaviour. Malaysia continues to struggle with issues of under-reporting. Due to limited resources, the Inland Revenue Board of Malaysia (IRB) cannot fully ascertain the underlying causes of non-compliance. This study is novel in that it proposes a different model for measuring tax compliance behaviour, including the variable of psychological empowerment, which has been limited in previous taxation studies. The study employed SPSS and AMOS for data analysis. Responses from 230 SMEs in the manufacturing sector were collected using stratified random sampling. The results indicate that both psychological empowerment and tax transparency have a positive and significant relationship with tax compliance behaviour. These findings will be valuable for tax authorities and administrators by highlighting key areas that can be managed more effectively to reduce the high number of tax compliance issues in the country.