6.

Newman Wadesango et al Volume 22, Issue 3, 2018

It is very essential that taxpayers are equipped with tax knowledge which enables them to
adhere to tax legislation. The tax knowledge is necessary for the purposes of enhancing
compliance level and will also assist record keeping in business and also in creating a conducive
business which enables the business operators who are compliant to operate freely. It was
suggested that business operators could increase their compliance rate if they obtain the relevant
tax knowledge and tax education. They also emphasized that the only way to have tax
compliance improved among businesses and individuals is through enhancement of tax
education and tax implementation among the businesses. Kicher (2013) concluded that the
reason why tax compliance rate is low in Africa is due to the lack of adequate tax education and
that if it is improved, the compliance rate would also be improved.

Palil & Mustapha (2010) explained that the tax knowledge has a positive impact on
compliance. Kassim (2013) also posited that provision of relevant knowledge to taxpayers would
result in them meeting their tax obligations as and when due. Some advocated that one of the
way
in which compliance could be attained would be through the tax authorities conducting public
addresses. According to Palil & Mustapha (2010), tax compliance can be enhanced through
provision of education to taxpayers making them aware of their social responsibilities thereby
influencing them to comply. He further explained that tax compliance is influenced by public
cooperation
and there are many merits associated in helping taxpayers to meet their tax liability,
through making significant improvements to the information provided or providing more tax
knowledge to them through, for example TV Campaigns. This equips the taxpayers to become
more responsible citizens and can result in an increase in tax revenue which is better than to use
the money on enforcement activities.

Tax knowledge has a significant and positive relationship with tax compliance. This means
that a high level of tax knowledge will increase voluntary compliance. This result also suggests
that tax knowledge and awareness play an important role among taxpayers and affects their level
of compliance. Tax knowledge is an effective tool to induce tax payers to be more compliant.
Some researchers also mentioned that if taxpayers are equipped with the relevant tax knowledge
this will increase their willingness to comply. He concluded that tax compliance can be improved
through provision of the relevant tax education and it will reduce the tax inclination to evade
taxes.

Palil & Mustapha (2010) discovered that tax knowledge affects tax compliance positively,
but however the level of tax knowledge significantly among respondents. Therefore, taking more
measures to provide tax knowledge to a greater part of the society assists in the prevention of
thetax evasion and results in the promotion of voluntary tax compliance. Conversely, poorer tax
knowledge is associated with negative attitude towards taxation and increases tendency to evade
tax. Tax knowledge usually relates to the taxpayers’ ability to comprehend and comply or not
with tax laws.
This results in high compliance costs which may deter taxpayers from complying.
Therefore, equipping taxpayers with tax knowledge will reduce the non-compliance level and
result in more taxpayers being compliant. Inadequate tax knowledge and the uncertainty of tax
laws results in taxpayers applying wrong tax provisions in preparation of their returns. Some
mentioned that if taxpayers are equipped with the relevant tax knowledge this will increase their
willingness to comply. He concluded that tax compliance can be improved through provision of
the relevant tax education and it will reduce the tax inclination to evade taxes. The study wishes
to assess the understanding of tax laws as a challenge of the implementation of other alternatives
to improve tax compliance of SMEs through SAS.

5. Clement Olatunji Olaoye 2017 (Studies)

Tax compliance is a major problem for many tax
authorities. It is not an easy task to persuade taxpayers to
comply with tax requirements even as the tax laws are not
always precise in some respects [25]. Taxpayers always tend
to avoid or reduce their tax liability either through tax
evasion or tax avoidance. This may give rise to nonregistration
or incorrect filling of their tax returns and loss of
revenue to the government. An unduly complex regulatory
system and tax regime enforcement makes tax compliance
unduly burdensome and often have a distortionary effect on
the development of small and medium scale enterprises
(SMEs) as they are tempted to change into forms that offer a
lower tax burden or no tax burden at all [31] and
consequently results in a tax system that imposes high
expenses on the society. A poorly executed tax system also
leads to low efficiency, high collection charges, and waste of
time for taxpayers [15].

defined tax compliance as filing all required tax

returns at the proper time and that the returns accurately
report tax liability in accordance with the tax code,
regulations and court decisions applicable at the time the
return is filed. A review of the literature shows that [6]
conducted the first study of the theoretical model of tax noncompliance.
This theoretical model is known as an economic
deterrence model [8]. The model assumes rational behaviour
among taxpayers’ and suggested that tax rate, probability of
detection and penalty rate are determining factors that affect
tax compliance. Tax compliance can be described as the
degree to which a taxpayer obliges to tax rules and
regulations. [24] opined that tax compliance is the
willingness of individuals and other taxable entities to act in
accordance within the spirit as well as the letter of tax law
and administration without the application of enforcement
activity.

The degree of knowledge and information might be an

important factor in the way taxpayers’ behave. Better
educated taxpayers’ are supposed to know more about tax
laws and fiscal policies and thus would be in a better position
to assess the degree of compliance [26]. However, it should
be noted that there might be people with a lower education
who have acquired a high knowledge of tax laws [13]. Some
taxpayers’ might find complexity of tax information more
difficult to understand than others [41]. On the other hand,
survey findings indicate that less educated taxpayers’ are less
exposed to tax compliance information and less informed
about relevant tax regulations and need assistance more often
[46].
More educated people may be less compliant because they
better understand the opportunities for avoiding taxes. Fiscal
knowledge may positively influence the practice of
avoidance [18]. [46] found that compliance is higher in areas
with a better educated population and areas with large student
populations have low levels of compliance. Furthermore,
areas with high levels of poverty and unemployment have a
low level of compliance for all groups. An important factor
which influences the incentive to seek tax information is the
relevance of information.

7. Siti Norfazlina Yusoff et al 2017

The influence of a specific knowledge on the tax compliance decision is assumed to be important
for the tax compliance behaviour. An inadequate level of tax knowledge could result in inaccurate
tax returns, and other negative consequences, including unintentional non-compliance, and
unfortunately this may lead to false tax computation among individual taxpayers. Furthermore, tax
knowledge improves an individual's awareness and ethics, thus reducing the tendencies of tax non-
compliance and producing more competent taxpayers in the future, however, it is not to be
expected that knowledgeable taxpayers would comply.

3. Dajana Cvrlje, 2015

Moreover, Lewis (1982) studied the impact of tax knowledge and attitudes of an individual on
completing the tax returns. His aim was to study the impact of increase in tax knowledge on tax
compliance behavior. He found that there is insufficient knowledge about tax regulations amongst
the population which negatively effects tax compliance behaviour. Eriksen and Fallan (1999) in their
study found that fiscal knowledge is significantly correlated with attitudes towards taxation. They
suggested that tax behavior could be improved by a better understanding of tax laws. In their
opinion, taxpayers must be given better tax knowledge in order to improve their tax ethics and
compliance behavior.

1. Ang Zhi Xin 2016 (study)

 Tax compliance is referring to the degree that taxpayer complies or fail to comply with the tax
regulations in their country. Tax compliance can be improved if the tax system is administrated tightly
and strictly through law enforcement and imposition of penalty toward taxpayers who are found guilty
of committing tax evasion. Majority of those previous studies are emphasizing on compliance behavior
of individual income taxpayers in selected countries or biggest companies. Nevertheless, only few
studies reviewed on level of compliance of taxpayers who are self-employed. Self-employed individuals
are increasingly important to the economic growth of the Malaysia and government’s attention is highly
focusing on this group of citizen.

Susanti (2007), tax knowledge can be defined as taxpayer's level of knowledge toward tax law and
regulations. Level of taxpayer's knowledge is determined by knowledge in relation to issues of rebate,
relief, tax returns and deduction from different taxpayer category of joint assessment, business and self-
employed. The findings of Nzioki and Peter (2014) indicate that tax knowledge and education has
significant positive effect on tax compliance in Real Estate Sector. An increase of tax knowledge level can
lead to the increase of tax compliance level. They also suggested that improve awareness of taxpayers
with regards to their tax obligations can be better improved through enhanced tax education services
rather than just provide them simple guideline on filling tax returns.

Alabede, Zainol Ariffin, and Idris (2011), tax knowledge of taxpayer can be equipped and enhanced
through education. However, the level of tax knowledge must not necessarily happen simultaneously
with the level of education. Just as in Fischer’s model and other study, education level of taxpayer can
only be one of the demographic factors which linked to tax knowledge, moral reasoning, non-
compliance opportunity and attitude but have no direct influence on tax compliance behavior.

Loo, Mckerchar and Hansford (2009) supported statements of Canada Revenue Authority (2009) as their
findings reveal that gaining tax knowledge has a significant impact on Malaysian’s compliance level
when the self-assessment system had introduced. They further indicate that the ability of taxpayer's in
complying tax by reporting taxable income, claim relief, rebates and compute tax liability correctly can
be determined by the sufficiency of taxpayer's knowledge toward tax policy.

Mukasa (2011) agree that tax knowledge has a significant positive relationship with tax compliance
behavior. As the result from their research, higher tax knowledge is expected to lead to higher
compliance rates and lower tax knowledge lead to lower tax compliance rate in adverse. The survey
among small and medium registered taxpayers operating in Kampala central division found that low tax
knowledge is one of the significant factors which contributed to less compliance. This is because lack of
knowledge of tax law coupled with inadequacy of taxation books in layman terms to guide them which
will contribute to unintentional tax non-compliance.
According to the findings of Mukhlis, Utomo and Soesetio (2015), there is a positive and significant
relationship between tax education on tax knowledge and tax compliance on Handicraft SMEs Sectors in
Indonesia support the above statement and note that there was a positive significant relationship
between taxpayer’s tax knowledge and tax compliance. The taxpayers who have equipped with the
sufficient tax knowledge are able to access their tax liability correctly ad file tax return forms on time.
Taxpayer cannot be expected to submit complete, proper tax returns accurately unless they have
sufficient knowledge to understand the system.

However, Kasipillai, Aripin, and Amran (2013), oppose the argument on positive correlation between
tax knowledge and tax compliance has opposed by some of the studies. They found that there is a
significant negative relationship between tax knowledge and compliance behavior. They claim that the
increasing knowledge of tax such as audit process and tax regulations expose taxpayers the opportunity
to evade tax. In other word, taxpayer who has higher level of tax knowledge is well-know about the
loophole in tax regulation and system know the legal way to reduce or even avoid tax. From their
research, they found that tax compliance to be higher for taxpayers who were less well educated and
older.

4. Nurlis Islamiah Kamil 2015

2. Nelson Maseko 2014

Tax compliance is currently a topical issue, especially in

developing countries as governments are seeking ways
to improve efficiency in tax revenue collection to finance
their budgets. Small and medium enterprises (SMEs)
are the majority business taxpayers in most developing
countries and as such their compliance levels directly
impact on government tax revenue collections.

Fany Inasius 2018

OECD (2016) defines it as the degree

to which a taxpayer complies (or fails to comply)
with the tax rules of his or her country, for example,
by declaring his or her income, filing returns,
and paying tax in a timely manner. Based on the
above definitions, it can be concluded that tax
compliance is the sincerity to which a taxpayer
reports his or her income, files returns, and pays
all of his or her taxes on time.

Tax knowledge also affects tax compliance,

wherein greater tax knowledge increases tax compliance.
Understanding tax regulations can lead to
a sense of participation in paying taxes. Conversely,
a lack of understanding of taxation can
increase the cost of taxation and the time required
to file taxes. Practical tax knowledge can also
contribute to tax compliance. For example, knowing
the tax officers have conducted a large number
of tax audits can make them appear powerful.
Therefore, simplifying tax laws, improving taxpayer
attitudes toward the complexity of tax systems,
and increasing taxpayer services are likely
to enhance taxpayers’ trust in authorities.

According Mohani (2003), one of the basic ways to increase awareness by provides knowledge to
the people. Tan and Chin-Fatt (2000), asserts that tax knowledge can be conveyed through a
general understanding of the tax rules. Knowledge about new tax system reform needs given to the
taxpayer and this will eventually encourage compliance (Singh, 2003).

Alebel Salmoon Mohammad Abood (2010) also stated that the public should be educated with
knowledge related to the new tax system whereby the end user will have to bear the tax burden.
Park and Hyun (2003), also suggests tax education is one of the effective tools to encourage more
taxpayers to comply the new tax. In other words, taxpayers are more willing to comply if they really
understand the concept of the tax base.