Guilt-minimisation and other determinants of tax non-compliance intention among SME owners in Malaysia: the moderating effect of religiosity

The importance of small and medium enterprises (SMEs) as the backbone in contributing to national income in Malaysia is undoubted. However, the Inland Revenue Board of Malaysia (IRBM) had reported statistical evidences pertaining to tax non-compliance among SMEs’ owners. Despite its importance, their tax noncompliance behaviour has not been given enough attention, particularly on their owners. Therefore, this study empirically investigates the determining factors of SMEs’ owners on their tax non-compliance intention. This study extends the theory of planned behaviour (TPB) model by incorporating the theory of economic deterrence, theory of social learning, theory of religious commitment and theory of neutralisation in order to determine the relationship between the constructs of TPB, tax structure, tax
literacy, guilt-minimisation, religiosity and tax non-compliance intention as well as to test the moderating effect of religiosity. Employing survey design, questionnaires were randomly distributed to 580 SME owners in Malaysia, with 72.8 percent response rate. The data collected were analysed by using PLS-SEM statistical tool. Findings reveal that attitude towards tax non-compliance, subjective norms, probability of detection, denial of injury, denial of victim and condemn the condemner positively influence tax non-compliance intention, whereas perceived behavioural control negatively influences tax non-compliance intention. Findings also
indicate that the significant positive relationship between attitude towards tax noncompliance and subjective norms with tax non-compliance intention became weaker for highly religious SME owners. Moreover, the significant negative relationship between perceived behavioural control and appeal to higher loyalties with tax noncompliance intention was stronger for SME owners with higher religiosity. On the other hand, the significant positive relationship between legal sanctions literacy and denial of injury with tax non-compliance intention was stronger for SME owners with higher religiosity. These findings contribute theoretically and practically with imperative implications to academicians, government and tax authorities