This study examines the relationship between peer influence, tax knowledge, tax incentives, tax fairness, and tax compliance behaviour among SMEs in Malaysia. It also investigates whether service quality moderates these relationships.
This study employs a self-administered questionnaire survey of 491 SMEs listed in the Federation of Malaysian Manufacturers (FMM), of which 230 responses were usable for analysis. AMOS is utilised to analyse direct and indirect relationships.
The results show that tax incentives, tax fairness, and peer influence all have a significant impact on tax compliance behaviour. Additionally, peer influence, tax incentives, and tax fairness are all strongly correlated with tax compliance behaviour when service quality is high. Nonetheless, it does not affect the relationship between understanding tax laws and compliance with tax regulations.
The determinants of SME tax compliance behaviour have received little attention in the existing research. The study broadens the applicability of current tax compliance theories and offers deeper insights into the difficulties SMEs face by examining the factors that influence their tax compliance. The results provide valuable insights that policymakers and tax administrators can utilise to develop targeted actions that enhance SME tax compliance.
