Abstract:
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 non-compliance behaviour has not been given enough attention, particularly on their owners. Therefore, this study empirically investigates the tax literacy of SMEs’ owners on their tax non-compliance intention. This study intends to examine the relationship between the constructs of tax literacy 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 technical literacy positively influences tax non-compliance intention, whereas religiosity negatively influences tax non-compliance intention. Findings also indicate that the significant negative relationship between general literacy 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.
