Tax Compliance Essay

2.0 Introduction

This chapter reviews the existing literature on taxpayer’s morale and demographic factor such age, gender and academic qualification and also tax compliance. The literature review tried to justify the taxpayer’s morale and demographic factor affecting the taxpayer’s to the tax compliance

2.1 Literature Review

A literature review being prepared is because to act as a justified material for the research topic. The focused variables on this studied can be obtain through demographic and taxpayer’s morale variables. This chapter also covered the hypothesis and the theoretical framework development of this study.

2.2 Tax Compliance

The definition of tax compliance is defined as the degree to which a taxpayer obeys

Compliance has been discovered to be influenced by many possible factors such as complexity of law, tax rates, gender, and ethnicity differences and ethical attitudes.

The study about influence factor of compliance has been performed by Sabri (1992). This study was conducted in Malaysia, based on the sample confined to Klang Valley residents who have filed tax returns with IRB. Based on he studied on the demographic variables namely age, occupation, monthly personal and household income, and educational background in relation towards tax knowledge. Based on the survey result, it indicates that gender, age and educational level are shown to have significant relationship with tax compliance whereas race, marital status and income level shows no significant with tax compliance.

From the educational background point of view, Sabri (1993) stated that people with higher educational level such as PHD tend to have deeper understanding and knowledge about tax than the people lower educational level. The meaning behind this statement would conclude that people with deeper knowledge about tax will be more compliant with tax

Taxpayer’s morale is used as the measuring entity to measures individual attitude towards paying taxes, unlike tax evasion that referring to individual behavior. This taxpayer’s morale approach is frequently used to explain why people pay taxes and why they evade them.

Based on the previous study that has been done by the researcher, we continue by examining different factors that influence the taxpayer’s morale in order to enhance the understanding about the effect of taxpayer’s morale towards tax compliance. By doing that, we had building an argument for assessing taxpayer’s morale from demographic factors. Regarding the education, some authors argue that people that are more educated are more likely to get a chance to evade taxes, whereas others find that people that are more educated might be in a better position of recognizing the importance of paying taxes for the society, therefore the probability of evading taxes reduces with education (Torgler & Schneider, 2006; Frey & Torgler,