Tax compliance behaviour among Islamic educators in Malaysia

Abstract

The Malaysian government has imposed personal income tax on any individuals who received income either income from employment, business or other incomes irrespective of religion and race. In Malaysia, Muslim taxpayers have dual obligations to comply with a similar source of income annually which are; (i) Zakat on income and (ii) Income Tax. The former is treated as a religious obligation while the latter is considered as a civil obligation. Hence, there are differing views on the imposition of personal income tax where several Islamic scholars said tax is permissible while several Islamic scholars said tax is impermissible. The different attitudes on income tax may influence the tax compliance behaviour among Muslim taxpayers. Thus, this study aims to explore the tax compliance behaviour among Islamic educators in Malaysia. The objectives of this study are to understand the Islamic educators view on the imposition of personal income tax, how the Islamic educators behave in complying the tax laws based on the views they perceived and how do the factors based on Theory of Planned Behaviour (TPB) might influence their tax compliance behaviour and the role of zakat on income in influencing their tax compliance behaviour. Semi-structured interviews were conducted through online platforms in this study. The findings revealed that regarding the main source of income, the imposition of personal income tax in Malaysia is permissible. Meanwhile, regarding the side income, the side income from part-time jobs is viewed as taxable income and the side income from Islamic religious preaching is not considered as taxable income and is not subject to tax. Hence, their tax compliance behaviour was influenced based on their views in regards to the main source of income and side income. Based on TPB factors, the Islamic attitude was the main factor that influences their tax compliance behaviour as they are deemed as religious people who have high religious values. Nevertheless, zakat on income did not directly influence their tax compliance behaviour generally but did influence their decision to pay zakat on income either to the official institution or directly to the beneficiaries as zakat payment can be claimed as a tax rebate. In a nutshell, the result of the current study may contribute to the Government, policymakers, tax authority, academics, registered taxpayers and future taxpayers especially in developing a proper mechanism to educate the taxpayers about tax knowledge and increase their awareness specifically on side income, and consequently to enhance the compliance rate and to reduce the gap between the hidden income and tax compliance.