THE RELATIONSHIP BETWEEN PERCEPTIONS AND LEVEL OF COMPLIANCE UNDER SELF ASSESSMENT SYSTEM: Tax Compliance and Tax knowledgePrevious researches indicate that tax knowledge is very essential in order to increase level of tax compliance. Hence, it is very important to have knowledgeable and competent taxpayers. Park & Hyun, suggest that tax education is one of the effective tools to induce taxpayers to comply more. In other word, taxpayers are more willing to comply if they understand basic concept of taxation. For example, the level of tax compliance in Japan is very high. The main reason for the high tax compliance in Japan is because of the efforts made by the Japanese National Tax Administration (NTA). The Self Assessment System was introduced in 1947 plays an important role for taxation learning process to taxpayers. To promote the principles of voluntary compliance, they were done more activities such as public relation, tax education, tax consultation, guidance and examinations.In addition, tax knowledge will also reduce the potential of evasion. In a cross country study by Richardson towards 45 countries in the world, he finds that education in general has negative relationship with tax evasion, where the tendency to evade tax will reduce with the level of education.
However, it is still questionable whether this general level of education will increase tax compliance. This is because in a study by Loo and Ho toward a group of salaried individuals in Melaka, Malaysia, they found that the taxpayers’ competency level is quite low even though most of them have tertiary education. This is an alarming situation because it might impact their readiness to exercise appropriate compliance under the new self assessment system (SAS). In a study by Junainah towards the implementation of SAS among individual taxpayers in Kota Kinabalu, Malaysia, she also finds that most of the taxpayers unwilling to participate in SAS because of the burden that they have to face, especially in terms of filling up tax return and calculating income tax payable. They are very comfortable with the simplification of the formal system. In his book entitled “Malaysian Taxation under Self Assessment” Kasipillai emphasize that Knowledge about tax law is assumed to be of importance for preference and to determine the acceptance of Self Assessment System (SAS).
Data were collected from respondents consist of taxpayers who are doing sole-proprietorship and partnership in the East Coast Region, namely Pahang, Kelantan and Terengganu. Convenience sampling has being used, where three hundred businesses has being selected from the website of Companies Commission of Malaysia (CCM). Of the three hundred businesses that were selected, 199 agreed to participate in this study which contributes to 66.3% response rate.