Tax implications of shadow economy in Malaysia : Insights from tax authority

This study examines the tax implications of the shadow economy in Malaysia through the perspectives of senior officials from the Inland Revenue Board of Malaysia (IRBM). It explores the current landscape of the shadow economy and investigates key factors contributing to its persistence. Utilizing a qualitative research design, data were gathered via in-depth interviews with ten purposively selected IRBM executives occupying senior and middle management positions. The findings suggest that the shadow economy comprising both legal and illegal activities conducted outside formal regulatory frameworks presents persistent challenges to tax administration, particularly due to its hidden and complex nature. Participants emphasized difficulties in estimating its scale, its continued growth, and its role in exacerbating tax leakage, thereby weakening national revenue collection. The study highlights the need for coordinated policy reform, technological integration, international collaboration, and increased public engagement to strengthen tax compliance and curtail the shadow economy