Factors affecting withholding tax compliance among payers in Johor Bahru

Withholding tax (WHT) compliance is a crucial yet often overlooked aspect of tax administration. Despite existing regulations, non-compliance among payers remains a challenge. Using the Theory of Planned Behaviour (TPB), this study examines the key factors influencing WHT compliance behaviour among payers in Johor Bahru, Malaysia. Specifically, it explores the influence of attitude, subjective norms, and perceived behavioural control (PBC), which includes tax complexity, tax knowledge, probability of audit and penalties on compliance behaviour. A survey was conducted, with a total of 326 questionnaires distributed and 178 returned, making up of 54.60%. response rate. The data were analysed using Exploratory Factor Analysis (EFA), correlation and multiple regression. The results reveal that subjective norms, and tax knowledge significantly drive WHT compliance, while attitude, tax complexity, probability of audit and penalties do not show any significant relationship. The result does not fully support TPB’s core premise that individual behaviour is driven by intention, which is shaped by personal attitudes, subjective norms and the PBC. This study contributes to the tax compliance research by refining TPB in a WHT-specific context by demonstrating that subjective norms play a more dominant role in WHT compliance. Payers may comply due to other external pressures, law requirements rather than personal attitudes. These findings also challenge the common assumption that enforcement measures alone can ensure compliance behaviour. Instead, the result highlights the importance of trust in tax authorities, perceived fairness, and clear tax guidance in shaping taxpayer behaviour. Trust enhances the influence of subjective norms and tax knowledge on compliance behaviour. When individuals trust tax authorities and perceive the tax system as fair, they are more inclined to follow the behaviour of their peers and are better equipped to understand and fulfilling their tax obligations. Policymakers should focus on simplifying WHT mechanisms, reducing administrative challenges, enhancing taxpayer knowledge, leveraging social influence, and fostering voluntary compliance through trust-building initiatives rather than relying solely on penalties and audits. To promote a more equitable WHT compliance model, shifting certain responsibilities to non-resident recipients can be effective, such as mandatory registration and tax reporting by non-resident which is similarly to Service Tax model on digital services in Malaysia. Future research could explore hybrid compliance models, integrating insights from the Slippery Slope Framework and Fischer’s Tax Compliance Model, to develop a more holistic approach to WHT compliance.