Proliferation of Hidden Income and Tax Evasion: Perceptions of Malaysian Professionals

12 Pages Posted: 22 Mar 2018

See all articles by Jeyapalan Kasipillai

Jeyapalan Kasipillai

Monash University Malaysia

Mei Yee Lee

Monash University Malaysia

Sakthi Mahenthiran

Butler University - Lacy School of Business

Date Written: March 20, 2018

Abstract

This study employs a qualitative approach to investigate the perceptions of professionals regarding tax evasion and avoidance in the informal sectors in Malaysia. We estimate tax evasion due to hidden income in Malaysia approximates MYR 44.97 billion (A$ 13.87 billion), around 5.4 per cent of gross domestic product in 2014. We used a survey to seek insights on hidden income from respondents who are experts in the fields of accounting and taxation, including senior government officers and tax professionals. The findings of the survey reveal that the three main sectors perceived to be engaged in ‘hidden income’ are, in ranking order: (i) petty trade; (ii) logging and timber; and (iii) money lending and pawn-broking. Our interviews with the respondents also reveal additional informal sectors involved in these activities, including human trafficking, bribing of enforcement agencies and illegal logging. This study assists to identify tax compliance gaps among the different sectors of the economy and provides information on sectors that require greater tax auditing. This will, in turn, furnish input to policy makers to develop strategies in encouraging voluntary compliance as well as enhancing the effectiveness of the existing tax and bureaucratic systems.

Suggested Citation

Kasipillai, Jeyapalan and Lee, Mei Yee and Mahenthiran, Sakthi, Proliferation of Hidden Income and Tax Evasion: Perceptions of Malaysian Professionals (March 20, 2018). Australian Journal of Asian Law, 2017, Vol 18 No 2, Article 11: 259-270, Available at SSRN: https://ssrn.com/abstract=3144815

Jeyapalan Kasipillai (Contact Author)

Monash University Malaysia ( email )

Jalan Lagoon Selatan
Bandar Sunway
Selangor Darul Ehsan 47500
Malaysia

Mei Yee Lee

Monash University Malaysia ( email )

Jalan Lagoon Selatan
Bandar Sunway, 47500
Malaysia

Sakthi Mahenthiran

Butler University - Lacy School of Business ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

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