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ELECTRONIC TAX FILING SYSTEM: MALAYSIAN TAX PRACTITIONERS' TECHNOLOGY READINESS, ACCEPTANCE AND COMPLIANCE CONSIDERATIONS

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ELECTRONIC TAX FILING SYSTEM: MALAYSIAN TAX PRACTITIONERS' TECHNOLOGY READINESS, ACCEPTANCE AND COMPLIANCE CONSIDERATIONS

BY

LAI MING LING

A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE DEGREE OF

DOCTORAL OF PHILOSOPHY

DEPARTMENT OF ACCOUNTING

KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

MAY 2005

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ABSTRACT

The Inland Revenue Board Malaysia (the lRB) is streamlining the tax administration policies to embrace an electronic lax filing (e-filing) system. With thee-filing system.

taxpayers and their representatives can transmit tax returns, payment and information directly to the IRB electronically rather than mailing the paper forms. Experiences of over!>eas counterpans that have embraced e-filing system!> have shown that thee-filing system can only work effectively with the assistance and cooperation of tax practitioner!>. However, at the time of this study, little is known about Malaysian tax practitioner!>' reactions towards the e-filmg system. ln response, this study ha-, emerged to fill a research void.

The objectives of this study arc to cxammc tax practitioners' technology readiness, acceptance and compliance considerations of the e-filing system. A mail survey was used for data collection. Using the systematic sampling method, questionnaires were mailed to 600 tax practitioners throughout Malaysia.

Firstly, the Technology Readiness Index (TRI) of Parasuraman and Rockbrnlgl'.

As!>ociate!>, Inc ( 1999) wa!> adapted to assess the state of technology readine!>!>

amongst tax practitioners. Secondly, an integrated technology acceptance model wa:-.

developed to examine tax practitioners' acceptance of thee-filing system. The theonc!>

underlying the integrated technology acceptance model were generated from the social psychology, information systems, accounting, taxation and marketing literature.

Thirdly, this study examined the mherent compliance considerations confronting tax practitioners and also evaluated the imponance of five different types of incentives that would motivate tax practitioners to use thee-filing system.

Based on TRI, the findings indicated that the respondents were positive towards new technologies. Nonetheless, they were wary about the security of the Internet technology. The respondents were segmented into explorers ( 15% ), pioneers (36% ), sceptics (21 % ), paranoids (26%) and technology laggards (3% ).

The structural equation modelling technique was used to test the integrated technology acceptance model. Results showed that behavioural intention (a proxy for technology acceptance) was significantly influenced by the tax practitioner's perceived usefulness, perceived ease of use and perceived insecurity of the e-filing system, as well as perceived behaviour control and social norms.

In addition, the survey uncovered the unwillingness of tax practitioners to pay a service fee and their lack of confidence in the electronic administrative capabilities of the IRB. Such factors appeared to discourage the take-up of thee-filing system. At the same time, the survey indicated that the quest for a 'speedy tax refund' ranked the top most important incentive to motivate the use of thee-filing system.

Overall, this study provides the needed empirical evidence to the current literature by expandmg into a relatively unstudied area of Malaysian tax environment. This study found the applicability of technology acceptance model in Malaysia. The ftndmgs have implications and contributions to the tax authonties, and the tax practitioner<;,

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besides contributing to the theory on modelling user's acceptance of the e-filing system. In addition, this study enhances our understanding on the importance of AICPA's (2001) guiding principles of good tax policy in developing and diffusing the e-filing system in the Malaysian tax environment.

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APPROVAL PAGE

The thesis of Lai Ming Ling has been examined and is approved by the following:

ala Sheikh Obid (Main Supervisor)

Aharncd Kamccl Mccra (Supervisor)

Norizan Mohd Kassim (External supervisor)

1b[ ~}os ·

...

s

amecd Bin Mohamed Ibrahim (Internal Examiner)

Glenn R. Lowry (External Examiner)

Ibrahim M. Zein (Chairman)

iv

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DECLARATION

I herehy declare that lht'- the~is is the result of my own mvcstigation, except where otherwi~e ~lated. Other source, arc acknowledged hy footnotes g1vmg cxplic1l reference~ and a h1hliography i~ appended

Name: Lai M111g L111g

S1gnaturc ..

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1?f ~ l)ate... . ... . t6/c:-/~s.-

V

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INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF UNPUBLISHED RESEARCH

Copyright~ 2005 by Lai Ming Ling. All rights reserved

Electronic Tax Filing System: Malaysian Tax Practitioners' Technology Readiness, Acceptance and Compliance Considerations

. No part of this unpublished research may be reproduced, stored in retrieval system, or transmitted, in any fom1 or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written pennission of the copyright holder except as providcd bclow.

I. Any material contained in or dcrived from this unpublished research may only bc uscd by othcrs in their writing with due acknowledgement

2. IIUM or its library will have the right to make and transmit copies (print or electronic) for institutional and academic purposes

3. The IIUM library will have the right to make, sore in a retrieval system and supply copies of this unpublished research if requested by other universities and research libraries.

Affinned by Lai Ming Ling

/72) .(

~-~---~·-+p

Signature

... I~ ... . ( 6 (~ld-{b S:-

Date

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ACKNOWLEDGEMENTS

I am heavily indchtcd to MARA University of Technology (UiTM) for the staff scholarship and !he financial support throughout this entire PhD programme.

I am deeply grateful to my supervisors, Assoc. Prof. Dr. Siti Normala Sheikh Obid and Assoc. Prof. Dr. Ahamcd Kamccl Mccra for their invaluable guidance and supports. Many thanks to my external supervisor, Assist. Prof. Dr. Nori1.an Mohd Kassim of United Arab Emirates University for her highly intellcclual guidance and encouragement. Special thanks go to Prof. Mohd Zain of United Arab Emirates University and Ms Tan Po Li of MARA University of Technology for reading my thesis and for their insightful comments and suggestions. I would also like to thank Prof. Simon Archer. University of Surrey for his constructive criticism to help me refine the thesis.

I also wish to thank the academic and administrative staff in the Department of Accounting, the Kulliyyah general office and the main library of the International Islamic University Malaysia for their supports. My thanks also extended to the librarians al the Inland Revenue Board Malaysia, al Block 11, Jalan Dula and the National Tax Academy, Bangi for their kind assistance and cooperation. Special thanks to Dr. Shukor Mahfar, Director of the Operation division. the Inland Revenue Board Malaysia and Prof. Dr. Ibrahim Kamal, Dean of Faculty of Accountancy.

UiTM for their moral support.

Special appreciation goes to Prof. Viswanath Venkatesh, University of Maryland for sending me twelve copies of his articles related to technology acceptance model. I am very grateful to Mr Charles Colby, the president of Rockbridge Associates, Inc and Prof. Parasuraman, University of Miami and Prof. Fred Davis, University of Arkansas for their personal communications and encouragement.

I am extremely grateful to the survey and conference participants for their cooperation and input. I have benefited much from several part1c1pants at various international conferences both locally and abroad. I would like to express my deepest appreciation to the anonymous conference and journal reviewers for their insightful comments and criticisms. Specifically, I am grateful to the comments received from (l) Prof. Gloria Mc Vay, Winona State University and conference participants at the Second Global Conference on Business Environment, London, England, (2) Anonymous conference reviewers at the Information Technology in Regional Areas (ITiRA) 2003 conference, Queensland, Australia and (3) Anonymous conference and journal reviewers of the Business & Economics Society International 2004 Conference and Global Business & Economic Review-Anthology 2004, USA, respectively, and ( 4) Anonymous journal reviewers of e Journal of Tax Research, University of New South Wales, Sydney, Australia and Academy of Accounting and Financial Studies Journal, Allied Academies, Inc. USA.

Finally, I thank my family, friends and colleagues for their emotional support and assistance.

VI

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TAHLE OF CONTENTS

Abstract... 11

Approval Page . . . 1v

l)eclarat ion... v

Acknowledgements... v1

I.isl of Tables . . . .. . .. .. . . .... .. . . .. . .. . .. . . ... x111

List of Figures... xv

List of Abbreviations... xvi

CHAPTER I INTRODUCTION I. I. 1.2. 1.3. 1.4. 1.5. 1.6. Introduction ... . Research Problem ... . Research Objective ... . Significance of the Study ... . Scope of the Study ... .. Outline of the Thesis ... . 5 9 10 12 13 CHAPTER 2 ELECTRONIC TAX FILIN(; SYSTEM: HACKCIWlJND AND THE (;lJil)IN<; PIUNCIPLES 2.1. 2.2. 2.2.1. 2.2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.8.1. 2.8.2. 2.8.3. 2.8.4. 2.8.5. 2.9. Introduction... 16

Brief Development of E-Filing Systems . . . .. 17

E-filing system: The Development in Malaysia How docs E-filing system work in Malaysia . . .. .. . . .. .. .. .. .. .. . .. 20

General Trends in E-Filing System... 21

Benefits of the E-filing System to the Three Main Players in Tax Settings .. .. .. . .. .. .. .. .. .. .. .. . .. .. .. .. .. . . .. .. .. .. . . .. .. .. . . 22

Barriers to Taxpayers' Adoption of the E-filing System .. ... .. ... 28

Barriers to Tax Practitioners' Adoption of the E-filing System.. 30

Some Compliance Considerations of the E-filing System .. .. .. .. 33

Guiding Principle of good Tax Policy for the Development of E-filing System .. .. .. . .. .. . .. . .. . .. .. . . .. . . 38

Certainty... 41

Convenience of Payment . . . .. . . . .. .. .. . .. . . .. . . .. . . .. 42

Economy of Collection . . . 43

Simplicity... 44

Transparency and Visibility... 45

Conclusion . . . ... 46

VII

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CHAPTER 3 LITERATURE REVIEW

3.1. Introduction . . . .. . . 49

3.2. The Conceptual Framework: Technology Readiness... 50

3.3. The Conceptual Framework: Technology Acceptance... . . . 55

3.3.1. Theory of Reasoned Action (TRA)... 56

3.3.2. The Technology Acceptance Model (TAM) ... 58

3.33. Theory of Planned Behaviour (TPB) ... (lO 3.3.4. Review of Previous Research Pertaining to End User's Acceptance of an IT/IS . . . ... () I 3 .4. Conclusion . . . 72

CHAPTER 4 RESEARCH MOl>EL ANI> IIYPOTIIESIS 4.1. 4.2. 4.2.1. 4.2.2. 4.2.3. 4.2.4. 4.2.5. 4.2.6. 4.2.7. 4.3. Introduction . . . 74

The Proposed Research Model and Hypotheses . . . 77

Behavioural Intention (Bl)... 79

Altitude (J\TT) Towards Using the E-filing System... 80

Perceived Behaviour Control (PBC) . . . 82

Perceived Usefulness (PU)... 83

Perceived Ease of Use (PE) . . . 85

Perceived Insecurity (Pl)... 8()

Suhjective Norms (SN)... 90

Conclusion ... . . .. 92

CHAPTER 5 RESEARCH DESIGN ANI> METHOI> 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7. 5.8. 5.9. 5.10. 5.1 I. 5.12. 5.13. Introduction... 93

The Outline of the Research Design... 93

Population of Interest . . . .. . . .. 96

The Sample Frame... 97

Research Method: Mail Survey . . . 98

Questionnaire Design... 99

Pre-test . . . I 07 Pilot Study... I 08 Full-scale Study... 109

Preliminary Examination of the Data... 112

5.10.1. Checking for the Accuracy of Data Entry... 112

5.10.2. Addressing Missing Data... I U 5.10.3. Assessing Non-response Bias... I 13 5.10.4. Examining the Outliers... 119

5.10.5. Assessing Normality . . . ... 125

Assessment of Reliability and Validity of the Measurement Instrument... 128

Data Analysis Strategy... 130

Conclusion... 132

VIII

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CHAPTER 6 DATA ANALYSIS I: TECHNOLOGY READINESS AND ACCEPTANCE

6.1. Introduction ... 133

6.2. The Respondents' Profile-;... 133

6.3. Data Analysis: Technology Readme~~... 137

6. 3. I. Technology Readines<; D1rne1Non... . . . .

i:n

(l 3.2. Technology Read mess Segment . . . . I 38 (l 3.3. Behavioural Intentions, Attitude.., and Perception.., of the E-t"1lrng System Across Technology Read1ne..,.., Scg1ncnt... . . . . . . . . . 140

() 4 Data Analysis. Technology Acceptance .. . . 145

6 4.1. Instrument Valrdat1on ... . . ... ... ... . . . .. . . .. . . . . . ... 145

(l.4.1.1.The Preliminary Tests . . . 146

6.4.1.2.Step I: Analysis of the Measurement Model (Initial and Revised)... 150

6.4.1.3.Assessing Construct Relrahillly and Validity of the Revised Measurement Model... . . . . . . 158

6.4.1 4 Step 2: Analysis of the Structural Equation Model... . . . 163

6.4.2. llypothes1s Testing... 168

(l.4.2.1 lrb1gnilicance of Attitude... 171

(l.4.2.2.S1g111ficance of Perceived Behaviour Control . . . ... 172

().4.2.3.Stgmlicance of Perceived Usefulness . . . . . . 173

6.4.2.4.Signrficance of Perceived Ease of Use . . . ... 175

6.4.2.5 S1gnilicance of Perceived Insecurity... 175

6.4.2.6.Signrlicance of Suhject,ve Nonm . . . . . . . . 177

6 4.2.7.The Added Path: Attitude on Perceived Behaviour Control... . . . ... .. . . 17~

6.4. 2.8. U nderstandmg Behavioural Intention . . . . . .. . . 180

6.5. Conclusion... 181

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CHAPTER 7

7.1.

7.2.

7.2.1.

7.2.2.

7.2.3.

7.2.4.

7.2.5.

7.2.6.

7.2.7.

7.3.

7.3.1.

7.3.2.

7.3.3.

7.3.4 7.3.5.

7.3.6.

7.3.7.

7.3.8.

7.3.9.

7.4.

CHAPTERS

8.1.

8.2.

8.3.

8.4.

8.5.

8.6.

8.7.

8.2. l.

8.2.2.

8.2.3.

8.2.4.

8.3.1.

8.3.2.

DATA ANALYSIS II: OTHER COMPLIANCE CONSIDERATIONS OF THEE-FILING SYSTEM

Introduction... 183

Data Analysis and Discussions... 184

Organisational Support... 185

Prior Computing Experience... 186

Perceived Business Benefits... 188

Mandating E-filing . . . .. 189

Willingness to Pay Fee For E-filing... .. 190

Confidence in the IRB's Electronic Administrative Capability... 191

Incentives to Emhrace the Electronic Filing System... 193

Other Inherent Issues that May Discourage the Use of the E-Filing System... 195

Systems Reliability and Stability... 195

Data Privacy. Integrity and Confidentiality... 196

Technology Readiness and Competency of the Tax Staff... 198

Time and Speed of Electronic Processes... 199

Proof of Receipt or Confirmation of Receipt... 200

Total Cost of Compliance... 20 I Psychic Cost... 202

Readiness of Tax Firms . . . 203

Taxpayer and Tax Agent Authentication Issues . . . 204

Conclusion... 205

CONCLUSION Introduction... 206

Summary of the Survey Findings . . . .. . . 207

Key Findings about Technology Readiness... 207

Key Findings about Technology Acceptance... 208

Key Findings about Inherent Compliance Considerations of the E-Filing System Pertaining to the Malaysian Tax Setting . . . 213

Key Findings About Types of Incentives to Motivate the Tax Practitioners to Use Electronic System... 215

Implications and Recommendations... 215

Implications and Recommendations to the Tax Authorities . . . 215

Implications and Recommendations to the Tax Practitioners . . . .. 229

Contributions of the Study... 231

Limitations of Study... 234

Suggestions for Future Research... 235

Conclusion . . . 236

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BIBLIOGRAPHY

APPENDICES

Appendix I

Appendix II

Appendix Ill

Appendix IV

Appendix V

Appendix VI

Appendix VII

Appendix VIII

Appendix IX

Appendix X

Appendix XI

Appendix XII

Appendix XIII

...

238

Development and Administrative Changes in

Malaysian Tax Administration Systems... 254

Leiter lo The Respondents and Quest ionnairc

llscd . . . 274 Pilot Study: Descriptive Analysis of the

Measurement Indicators .. . . .. . .. . . .. . . .. 281 Pilot Study: Preliminary Reliahility and Validity

·rests... 282 AMOS Output for the Original Measurement Model:

Correlations . . . . .. .. .. .. . . .. . . .. . . 2~~

AMOS Tahle Output for the Original Measurement Model: Fit Measures... 284 Selected AMOS Tahle Output for the Original

Measurement Model . . . 285 Selected AMOS Table Output for the Revised

Measurement Model... 288 AMOS Table Output for the Research Model:

Residual Covariances ... 292 AMOS Table Output for the Research Model:

Implied Correlations... 293 AMOS Table Output for the Research Model:

Variances ... 294 Selected AMOS Table Output for the Research

Model. ... 295 Selected AMOS Text Output for the Research

Model: Modification Indices... 299

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Appendix XIV

Appendix XV

Selected AMOS Table Output for the Revised

Research Model... 300 Comments and Suggestions From Tax Practitioners Regarding the Electronic Filing System (Unedited) 305

(;LOSSA RY OF TERMS . . . 320

LIST OF PUBLICATIONS (Journal Papers and Conference

Proceedings Produced Out of This Study) ... 323

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Table 2.1.

Table 2.2.

Table 2.3.

Table 2.4.

Table 2.5.

Table 2.6.

Table 3.1.

Table 5.1.

Table 5.2.

Table 5.3.

Table 5.4.

Table 5.5.

Table 5.6.

Table 5.7.

Table 5.8.

Table 6.1.

Table 6.2.

Table 6.3.

LIST OF TABLE

Transformation from Manual Tax Administration

to Electronic Tax Administration .. .. .. .. . .. .. .. .. . .. .. .. .. . .. .. .. .. .. . 21 Benefits of thee-filing system to the three Main

Players in Tax Settings ... .. 24 Barriers to Individual Taxpayer E-filing . . . 29 Barriers to Tax practitioners' E-filing .. . .. .. .. . .. .. . .. . .. . .. . .. .. . .. . . 32 Prior Studies and/or Reports Related to the

Implementation of Electronic Filing .. . .. . .. . .. .. .. .. .. .. .. . .. .. .. .. .. .. 37 Guiding principles of Good Tax Policy . . . 40 Summary of Prior Research Conducted In Exa111111ing

Technology Acceptance .. .. . .. .. .. .. .. .. .. .. . .. . .. .. . . .. . . .. .. . . .. .. .. (17

Operational Deli nit ions oft he Research Variables

and the Measurement Scales Used .. .. .. .. .. .. .. .. .. .. .. .. .. . .. . . .. .. .. I 04 Testing for Non Response Bias (I-lest for Equality of Means

bet ween 30 Early Responses and 30 Late Responses) ... ,... I 16 Testing for Non Response Bias (t-tesl for Equality of Means

bet ween 30 Early Responses and 30 Late Responses).. . . I I 7 Testing for Non Response Bias (t-test for Equality of Means

bet ween 30 Early Responses and 30 Late Responses)... .. .. . .. I 18 Cases with Z-score Above± 3.3... 121 Multivariate Outliers: Observations farthest from the

centroid (Mahalanobis distance), output based on Amos

Software on 192 data... 124 Descriptive Analysis and Normality Test (SPSS output)... 127 The Assessment Strategies Used in this Study... 128 The Respondents' Profiles by State .. . .. .. .. .. .. .. . .. .. .. . .. .. .. .. . .. .. 134 The Respondents' Pro Ii Jes .. .. .. . .. .. .. .. .. . .. .. .. .. . .. . .. .. .. .. . .. .. .. . D6 Technology Readiness Dimension, Mean and Standard

Deviation... 138

XIII

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Table 6.4.

Scale Stalislics of Technology Acceptance Variables ... 141 A Tes1 of Rclalionship between Technology Readiness

Segment and lJse lntenlions. Attiludes. Pnception,

ol lhL' E-filing Systern... .. .... .. .. ... .. 144 Table 6.(1.

lkscriplive Analysis of !he Variahks/Measurernenl

Indicators... 147 Tahle (1.7.

Composite Means, Standard lkvialions and

Correlations between !he Sludy Variables ... 149 Table 6.8.

Fit Indices, Recommended Guidelines and Indices Values of the Initial Measurement Model and Revised

Measurement Model... I .S.S Table <1.9.

Properties of lhe Revised Measurement Model ... I .SlJ Table (1.10. Analysis of lnler Measuremerll Correlalions Among the

Indicators in lhe Revised Mcasuremenl Model... l<iO Table (1.11. Discriminant Validity... I (12

Table 6.12. hi Indices, Recommended Guidelines and Indices Values

of the Research Model and Revised Research Model .. .. .. .. .. .... I 6(1

Table 6.13. The Significance of Individual Path... 169 Table 6.14 Strengths of Individual Variables on Behavioural

Intention... 180 Table 7.1. Organisational Support... 18.S Table 7.2. Prior Computing Experience... 186 Table 7.3. Others Compliance Considerations (N=I92)... 189 Table 7.4. Types of Incentives: Mean, Standard Deviation

and Ranking... 193 Table 8.1. The Significance of the Hypothesised Paths... 208

XIV

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Figure 2.1

Figure J. I Figure J.2.

Figure J.J.

Figure 4.1.

Figure 5.1.

Figure (). I . Figure ().2.

LIST OF FIGURES

The Relationship between the Main Player.., in Tax Settings

(Before and After the Implementation of thee-filing System)... 23 Theory of Reasoned Act ion .. .. .. .. .. .. .. . . .. .. .. . .. . . .. .. .. . . ':i 7 Technology Acceptance Model .. .. . .. .. .. . .. .. .. .. . .. . .. . .. .. . . .. ... 59 Theory of Planned Behaviour . . . .. . .. . . .. . . .. .. . .. . . (1() The Proposed Research Model ... 78 The Out line of the Research Design .. .. .. .. . .. .. .. .. .. .. .. .. .. .. .. .. .. 94 Segmental Analysis . .. .. .. .. .. .. .. .. .. .. .. .. .. .. . .. . .. . .. . .. .. . .. .. .. . .. . I 39 The Measurement Model: Latent Constructs and

The Respective Manif'cst Indicators... 151 Figure 6.J. The Initial Measurement Model ... 154 Figure 6.4. The Revised Measurement Model... 157 Figure 6.5. The Research Model .. . .. .. . .. .. .. .. .. . .. .. .. .. . .. .. . .. .. . .. .. . .. .. .. .. .. IM Figure 6.6. The Revised Research Model .. . .. .. .. . .. . .. .. .. .. .. .. . .. .. . .. .. .. . .. .. 16 7 Figure 6.7. Results of the Model Test: Standardised Path

Coetlicients (P) and Explained Variance (R2) ... 170 Figure 8.1. Results of Model Test: Standardised Path Coeflicient (B)

and the Explained Variance (R2) .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. • 209

xv

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AAANZ ACCA AICPA ATO CFA CIMA DGIR ETAAC l·TA

GAO ICAA ICAEW ICT IRAS IRB IRD IRS ITA MAICSA

MIA MICPA MIT

LIST OF AHHREVIATIONS

Accounting Association of Australia and New Zealand Association of Chartered Cert ilied Accountants American Institute of Cert ilied Public Account ants Australia Tax office

Confirmatory Factor Analysis

Chartered Institute of Management Accountants Director Ciencral of Inland Revenue

Electronic Tax Administration Advisory Commillcc Federation of Tax Administrators, United States General Accounting Oflice. U.S.

Institute of Chartered Accountants in Australia

Institute of Chartered Accountants of England and Wales Information and Communication Technology

Inland Revenue Authority of Singapore Inland Revenue Board

Inland Revenue Department

Internal Revenue Service, United States Income Tax Act, 1967

Malaysian Association of Institute of Chartered Secretary and Ad min isl rat ors

Malaysian Institute of Accountants

Malaysian Institute of Certified Public Accountants Malaysian Institute of Taxation

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MOP NASCIO NTRC NTRS OECD PKI

SEM SGATAR TAM TPB

TRA TRI

U.K.

U.S.

Ministry of Finance. Malaysia

National Association of State Chief Information Officers National Tax Research Centre. Manila, Philippines National Technology Readiness Survey. United States Organisation for Economic Co-operation and Development

Public Key Infrastructure Structural Equation Modelling

Study Group on Asian Tax Administration and Research Technology Acceptance Model

Theory of Planned Behaviour Theory of Reasoned Action Technology Readiness Index

United Kingdom United States

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CHAPTER 1

INTRODUCTION

I.I. INTRODUCTION

Globally, the tax environment is changing rapidly. Not only arc the social, economic and political conditions evolving more quickly than ever before, but also the revolution of information and communication technology (ICT) is challenging the operation of the tax revenue system. The advancement of ICT has profound implications on the tax administration and compliance settings. Worldwide, tax authorities arc being challenged to maintain a modernized, efficient and responsive tax administration system to facilitate and intensify tax compliance. Since the I 990s, several tax authorities; particularly those from the developed countries and the Asia- Pacific regions have progressively harnessed the power of ICT by embracing an electronic tax filing (e-filing) system.

An e-filing system relies on modem computer networks, such as Internet technologies and the worldwide web for a wide range of tax administration and compliance purposes (James & Wallschutzky, 1993). An e-filing system integrates tax preparatio~

filing and tax payment. Tax users (taxpayers or their tax representatives) can file the tax returns and information electronically via the enabling technology. When a tax user files a tax return electronically to a processing centre of the tax authorities' computer system, the computer will check for mechanical and technical accuracy before accepting it. An online acknowledgment of receipt will also be issued

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automatically. Besides the filing of tax returns electronically, tax users can also make tax payment, perform account enquiry, and download tax forms and information, electronically (James and Wallschutzky, l 993; Kana, 2001 ).

Several empirical studies found that electronic filing is an cff cctivc, easy to use, more accurate and speedy method than traditional paper filing (Bird & Oldman. 2000:

James & Wallschutzky, 1993). The potentials arc clearly for improving administrative efficiencies in the mail, cashiering, data entry, account maintenance and filing functions. It was reported that the use of the e-filing system could reduce time consuming visits and phone calls to the tax office, and also minimising other possible postal disruptions due to postal strikes (Crowe, 1992). As an e-filing system requires less time and staff effort, tax staff can be re-deployed for providing better taxpayer service, 'back end' auditing and tax investigation (Bird & Oldman, 2000).

Furthermore, new tax technologies help the tax agency to work faster, smarter and enable them to analyse and exploit historical client data in countless ways (Holub, 2001 ).

Previous experience of overseas tax authorities have shown that the move to embrace an e-filing system is not hassle free and well accepted by all parties (ACCA, 2002;

A TO, 2000; ET AAC, 2002). Although, the e-filing system may offer potential benefits to improve administrative compliance efficiency, the benefits gained may be obstructed by tax users' unwillingness to accept and use the available emerging technology and services. Worldwide, tax users' resistance and under-utilization of the e-liling system remains a greatest concern, which still plagues the tax authorities that

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have embraced the e-filing system (Accounting Web, 2003; Block. 2003; ET AAC'.

2002).

Studies found that even taxpayers and tax practitioners in the developed countries such as the United Kingdom (UK) and the United States (US) arc still wary of the e- filing system. Tax users' resistance was argued to be mainly due to misconception of the e-filing system, lack of perceived benefits, perceived case of use, perceived insecurity, cost of compliance, data security and confidentiality issues (ACCA, 2002;

Block, 2003; ETAAC, 2002; Walsh & White, 2000). Attitudinal surveys also reported that tax users vary widely in their attitudes, technology readiness, acceptance and

utilization of new tax technologies (ETAAC. 2002).

The real life phenomenon in various tax settings around the world provides the insight that it is important to conceptualising a framework to guide the development of the e- filing system. In this direction, the literature review found the AICPA's (2001)

"Guiding Principles of Good Tax Policy" are fundamental attributes for designing good tax policy for an e-filing system.

On the other hand, in a tax compliance setting, Klepper and Nagin () 989, p.191) asserted that tax practitioners (i.e., the professional tax preparers) represent "both a means of increasing compliance and also potentially a threat to compliance". Erard (1993) shared the same view; he expounded that tax practitioners are in a position to exercise a strong and direct influence on the tax administration and compliance processes.

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Newberry et al. (1993) provided empirical support that tax practitioners are important third party, as a great number of taxpayers deal with tax agencies through tax practitioners. When dealing with a complex tax situation such as when a tax law is ambiguous under the self-assessment system and e-filing system, more taxpayers, who can be in fear of penalties, arc turning to tax practitioners for help (Kocakulah &

Grower. 2000). It is evident that an c-filing system can only work effectively with the assistance and cooperation of tax practitioners (Kahan, 1999).

Most recently, the Inland Revenue Board Malaysia (the IRB) has been streamlining the tax administration policies to embrace an e-filing system (MIA, 2000; SGA TAR, 2001 ). The main purposes of the IRB in embracing the e-filing system arc to improve customers' service and facilitate tax compliance through administrative improvement.

With the e-filing system, Malaysian taxpayers and tax agents can file income tax returns electronically via the enabling Internet technologies, rather than through mail or physical visits to the tax office. This may eventually make the art of filing tax returns as easy as possible. With the adoption of e-filing system, the IRB hopes to reduce paper work and to free up about 80% of its staff for tax auditing and investigation purposes (Pardas, 2001 ).

Basically, the Malaysian tax authorities expect to use thee-filing system in facilitating voluntary compliance, decreasing cost of collecting taxes, freeing staff from routine manual assessment work to more critical and strategic areas such as auditing, investigations and taxpayer service. However, the move of the IRB to embrace the e- filing system gives rise to several concerns. Firstly, are Malaysian tax officers ready for the strategic business plan to implement e-filing system nationwide in the near

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Rujukan

DOKUMEN BERKAITAN

Therefore, the purpose of this study is to assess the taxpayers’ understanding of income tax payment, taxpayers’ e-Filing readability levels, taxpayers’ income tax declaration,

Service quality of RMCD, compliance cost, tax complexity, detection probability, and tax knowledge are assumed to be the predictors adapted from the theories to examine

There are three main independent variables in this study, namely, duality (DUALITY), multiple directorships (MULTI), board composition (BOARD), and board size (BSIZE).. According

Finally, this study will improve theoretical understanding and add more literature on the effectiveness of the taxation systems education implemented to increase tax compliance

However, saad (2009) reported that there was no significant relationship between perceptions of tax fairness and tax compliance decision among individual taxpayers in Malaysia

The results of the study showed that only quality of public governance had significant relationship with tax compliance among health practitioners while attitude of taxpayer and cost

This research, confines its study to micro factors such as gender and ethnic groups , influencing compliance behavior of individual taxpayers.. There is also a difference

The same mean score (4.50) reported by the respondents' awareness about e-Filing procedure reported by agree (40%) and strongly agree (55%).. Subsequently, the mean score 4.45