The importance of tax knowledge to combat tax evasion / Siti Hawa Shuid

Tax evasion or tax cheating has become common practice in many countries, creating a huge challenge for governments all around the world. This sort of financial crime could have a serious negative impact on government’s revenue. As we know, tax collection represents a major contributor to the Malaysian government's revenue, which comprises more than 70% of total revenue. Tax evasion, particularly in underdeveloped nations, may have a more negative social and economic impact (OECD, 2014). There are many factors that could influence tax evasion among individual taxpayers that can be categorised under demographic factors: age, level of income, source of income, and level of education. Older people have more time to accumulate wealth than younger ones, giving them an opportunity to avoid paying taxes. Younger individuals also try to avoid paying taxes if they believe the tax penalties or punishments will not have a significant impact on them. People are more willing to engage in tax evasion activities when they have a high level of income. They also tend to evade tax when they feel they are not treated fairly in the tax system. Self-employed people are more likely than employees to underreport their business income. They tend to organise their taxable income in order to decrease the amount of tax they must pay (Che Rosli et. al, 2018). A less educated person may not fully comprehend why paying taxes is critical to meeting social needs, leading to noncompliance with tax regulations (Saad, 2014).