Examining the Factors of Tax Non-Compliance: A Case Study of Small and Medium Enterprises in Metro Area

Abstract

Hidden income is a business income and individual income should be recorded and taxed but taxpayers are not reported in full or not reported at all. In this paper we examine the determinants of tax non-compliance among Small and Medium Enterprises (SMEs) in Metro area. 150 questionnaires were distributed to the three sectors namely, distribution, food and beverages, and service providers; only 86 agreed to participate (57.3%). Kaiser-Meyer-Olkin, descriptive and Pearson correlation test were used to analyse the data. The results indicate that there was a number of significant relationship between tax incentive and company size towards tax non-compliance. Therefore, the importance of this phenomenon is the potential serious revenue losses to government and resulting in the possible under funding of public’s service and also an unfair burden on honest citizens.

Keywords

• Tax Compliance
• Tax Knowledge
• Fiscal Psychology Theory