Tax Revenue Essay

CHAPTER TWO

LITERATURE REVIEW

2.0 Contribution of tax revenue to total revenues

It is undeniable that tax is the major source for government revenue. This is shown from the annual report by Inland Revenue Board of Malaysia. From 2011 to 2013, the amount of tax revenue obtained were half the total revenues obtained. In 2011, IRBM recorded the collection of direct tax of RM 109.609 billion from the total revenues of RM 185.419 billion, which means 59.11% of the total revenues came from direct tax collected. In 2012, IRBM recorded the collection of direct tax of RM 124.88 billion from the total revenues of RM 207.913 billion, which means 60.07% of total revenues came from direct tax collection. In 2013, IRBM recorded the collection of direct

It is understandable that by having high knowledge and understanding of tax laws and rules, the taxpayers could carry their tax statutory obligations more smoothly. They could file their tax returns within given period, honestly reporting their tax affairs and correctly compute their tax liabilities (Loo et al., 2009).

But, by having high or sufficient knowledge regarding tax, often the perceptions of taxpayers’ changed. The fairness of the tax system will be questionable to these educated and knowledgeable taxpayers (Kasipillai, 1997; Mahat, 2007). High level of tax knowledge will reduce the number of unintentional non-compliance behaviour.

With these changing perceptions, it will also create a possibility for these knowledgeable taxpayers to commit tax evasion.

It is reported that the number of Malaysian tax defaulters has increased since the implementation of self-assessment system. The number has increased up to 10 times in just within two years. In 2003, the number of defaulters was 25,160 and rose to 239,666 in 2005. Not providing sufficient information, failure to submit returns and declaring false returns are among the tax offences committed (Krishnamoorthy,

Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for (Vaughan, 1997) and as a result of uncertainty concerning the occurrence of a loss (Rejda, 2008). An event with high probability of loss is riskier than those with low probability (Vaughan, 1997). A person is regarded as a risk taker when performing the action with full consciousness of the risks, the pros and cons and the potential outcomes. In this situation, the individual is happily accepting the consequences of his or her