Factors affecting compliance with tourism tax: evidence from Malaysia

The issue of tax compliance has been critically discussed by the Malaysian Government and academic researchers due to the fact that the tax compliance directly affects the source of national income. Indirectly, the compliance affects the social and economic development of a country. In Malaysia, the Royal Malaysian Customs Department (RMCD) is responsible for administering and enforcing the law of indirect taxes including tourism tax. Existing actions taken are mostly related to the economic factors such as raising penalties, increasing the number of operations and inspections, adding the number of enforcement officers and claiming tax debts through court action. In order to overcome this problem, this study points out the equal importance of the agency and policy makers to view and resolve this issue through the non-economic perspectives for a number of reasons. First, the actions of a non-economic factors are more closely related to the action in which behaviour of tourism tax operators’ can be controlled. Second, preventive and controlling measures of compliance can be enhanced as it saves time, energy and cost for solving the issue when it occurs. In order to understand the Malaysian tourism tax operators’ compliance behaviour, the study intends to adapt the Theory of Planned Behaviour (TPB) to describe behaviour and actions taken by the compliant tourism tax operators. In addition, this study proposes tourism tax as it is a new indirect tax and already contributed to Bill of Demand (BOD) issued by the RMCD. This situation signifies a severe matter to the agency and policy makers as it potentially leads to serious leakage in the national revenue. Therefore, studying the tourism tax operators’ behaviour in case of tourism tax is strongly relevant based on the belief that if the compliance issue can be gradually identified, it will offer a positive impact on the economic, social and national development. Using a quantitative research approach, survey questionnaires were distributed to 400 tourism tax operators’ that registered with RMCD.