Rohaya Md Noor

Determinants of Tax Evasion on Imported Vehicles

Abstract The importance of taxation as a major public finance to developed and developing countries is non-debatable. The issue of smuggling activities related to the indirect taxation had caused a great lost to the government not only in term of monetary aspect, but also non-monetary aspects such as quotas, embargo and product quality. However, the study of a tax evasion and smuggling activities in the indirect taxation have received less attention among the researchers and legislators. Hence, the current study aims to examine factors affecting the tax evasion on excise duties for importation of vehicles that can be associated with smuggling activities in Malaysia. The study has indentified several potential determinants related to tax evasion on imported vehicles, such as the tax rate, penalty structure, the cars brand and size of the business of car importers. To achieve the objectives, this study used sample data from vehicles smuggling cases investigated by the tax authorities in Malaysia. The hypotheses were tested using both univariate and multivariate statistical methods. The statistical results provided evidence on the significant values of evaded excise duties, whereby the excise duties and penalty rates are the contributing factors for the tax evasion in vehicles smuggling activities. Hence, this study contributes towards the body of literature in the discussed area and also provides strategic information to the policymakers in reviewing the tax policy related to excise duties on imported vehicles in the future.

Tax planning and corporate effective tax rates

This study attempts to investigate the tax planning activities of Malaysian public companies listed on Bursa Malaysia during the official assessment system tax regime (OAS) (whereby the tax computation is prepared by tax authorities) and the self assessment system tax regime (OAS) (the tax computation is prepared by taxpayers). The objective is to examine the level of corporate effective tax rates (ETRs) experienced by companies during both tax regimes. This study uses pooled sample data of 316 companies for the years 1993 to 2006. In investigating the aggresiveness of the tax planning activites during the two tax regimes, the investigation period is classified into two: the period from 1993 to 2000 represents the official assessment system tax regime, and the period from 2001 to 2006 represents the self assessment system tax regime. This study finds that corporate ETRs are below the statutory tax rate (STR) in both tax regimes. The current study reveals that ETRs during the self assessment system tax regime is lower than the official assessment system tax regime. Additionally, this study examines the determinants of corporate ETRs during both tax regimes. The result supports political cost theory which suggests that larger companies endure higher ETRs. Further, the statistical results provide evidence that lower ETRs are significantly related to highly leverage companies, greater investment in fixed assets and lower investment in inventory. This study finds that companies with higher return on assets face lower ETRs. In addition, sector analysis are carried out to provide the evidence for the variability of ETRs across sectors. The results indicate that companies from trading and services, properties and construction sectors face higher ETRs. Overall, this study explains the impacts of tax provisions on corporate ETRs and determinants of corporate ETRs.

The Longitudinal Study of Earnings Management: Analysis on Companies Financial Abilities☆

Abstract The aim of this paper is to provide empirical evidences of the relationships between the financial abilities towards in the financial statement to the earnings management level (EM) among of public sector companies on Bursa Malaysia from year 2001 until 2012. Primarily, the initial samples comprised 375 selected public listed companies with 4500 firm-years observation. From the samples, those companies who have not implied with the earnings management activities was excluded as a sample of the study. Thus, the final sample of this study was comprises 3971 firm-years observation. The study was adopted the Kothari Model as a measurement model for earnings management level in the business organization. Meanwhile, the findings of this study indicated significant relationships between earnings ability (EAB), financial structures ability (FSAB), debt repaying ability (DRAB) and non-financial factors (NFF) towards the earnings management level (EM) in the business organization. Therefore, these evidences can be used as new financial mechanisms to potential and existing stakeholders in order to assist them for any decision making purposes.

Policy and Compliance Issues of Tax System for Shariah Equities, Islamic Finance and Zakat Reporting in Malaysia

The development of Shariah equities and Islamic finance requires effective and distinct policy and guidelines of the tax system. There are more than 600 Islamic financial institutions across 75 countries globally. The proliferation of Islamic financial institutions in new jurisdictions across the globe is clear evidence of the rapid internationalization of Islamic finance. Malaysia is known as a global leader for Islamic capital market. The Capital Market Master Plan 2 (CMP2) launched by Securities Commission Malaysia in April 2011 has emphasized on the strategy for promoting the internalization of Islamic finance. Thus, there is a need for a specific tax system for the Islamic capital market and finance in Malaysia. This study reviewed the current tax system for Shariah equities and Islamic finance and examined the reporting of zakat among Shariah-compliant companies in Malaysia. The study found that the tax legislations have provided several tax provisions to promote Islamic finance. However, there is no specific tax system to cater Shariah equities and Islamic finance. In other words, the conventional tax system is also applicable to the Islamic finance transactions. The study also revealed that only 15 Shariah-compliant companies had disclosed zakat in the annual reports during the years 2009 to 2012. This study concluded that the development of Shariah equities and Islamic finance requires policymakers, practitioners and zakat scholars to look into clear standards and policies of the tax system for future growth of the Islamic capital market and further enhance the Shariah compliance level of the Shariah-compliant companies.

SMEs’ Performance: Financial Incentives and Governance

Small and medium enterprises (SMEs) have become the backbone for the Malaysian economy and the engine for the country’s growth and innovation. SMEs represent 99.2 % of the total business establishments and have contributed 59 % of total employment as well as 32 % of GDP for Malaysia. The government transformation program (GTP) initiated by the Malaysian government has focused on SMEs to ensure the relevancy, sustainability, and competitive edge of this industry, especially in the global market. Hence, the current study investigates the effectiveness of the financial incentives provided by the government, as well as the governance aspect, which can be associated with SMEs’ performance. The current study used tax incentives and leverage as proxy for financial incentives, while the board size is used to proxy the governance issue. The sample comprised of 1,377 SMEs’ firm-years collected from the period of 2000–2010. The findings of this study suggest that tax incentives have a positive impact on SMEs’ performance. However, leverage and board size have a negative relationship with SMEs’ performance. Thus, the findings suggest that tax incentives provided by the government, the less leverage enterprises, and smaller board size enhance the performance of SMEs. This study provides important feedback to the policymakers in evaluating the financial incentive scheme and enforcing corporate governance on SMEs toward sustaining this industry.

Corporate governance and tax compliance: A study on Small Medium Enterprises (SMEs) in Malaysia

This study attempted to examine the relationship between corporate governance and tax compliance among the Small and Medium Enterprises (SMEs) in Malaysia. Currently, SMEs are a rapidly growing business and play a significant role in boosting economic growth, as job provider, and leader in product innovation, as well as, tax revenue collection. Prior studies reported that in large companies, corporate governance could increase the tax compliance. However this issue had not been widely explored with regards to SMEs. Therefore, considering the importance of SMEs and their contribution of income tax revenue to the country, this study provided significant results on the relationship between corporate governance and tax compliance. The findings indicated the importance of directors in enhancing the tax compliance. Furthermore, this study also found that larger board size was associated with higher tax compliance. Consequently, the overall findings of this study provided another angle on the importance of corporate governance in determining the level of tax compliance in SMEs.