Journal of Critical Reviews ISSN- 2394-5125 Vol 7, Issue 11, 2020 TAX COMPLIANCE MOTIVES AMONG GRAB CAR DRIVERS IN MALAYSIA Nik Puteri Nur Anis Noor Azmi1, Indarawati Tarmuji2, Nadiah Abd Hamid3*, Zarinah Abdul Rasit4, Norfadzilah Rashid5 1,2,3,4Faculty of Accountancy, Universiti Teknologi MARA (UiTM) Selangor. 5Faculty of Business and Management, Universiti Sultan Zainal Abidin, Gong Badak Campus, Terengganu. *[email protected] Received: 06.04.2020 Revised: 13.05.2020 Accepted: 04.06.2020 Abstract E-hailing is one of the platforms that users choose as daily transportation by ordering transportation through the application software via devices, and Grab is the leading E-hailing service with the highest revenue among E-hailing services. On the other hand, tax collection is the major source of the continuous development of the country. The objective of this study is to examine the relationship between tax knowledge, tax awareness, tax morale, and tax penalty with tax compliance among Grab car drivers in Malaysia. The theory of planned behaviour applied for this study in order to engage the behaviours of taxpayers towards tax compliance. To achieve the research objectives, a simple random sampling technique was used in this research as this study is limited to Grab car drivers in Malaysia and questionnaires have been distributed and answered by 100 respondents via online survey questionnaires. The data analysis method of this study was conducted using the Statistical Package for the Social Sciences software (SPSS) Version 24. Based on the results, tax knowledge, tax morale, and tax penalty have significantly affected tax compliance among Grab car drivers in Malaysia. The result of this study may assist tax authorities, academicians, and future researchers to enhance the level of tax compliance among Grab car drivers in Malaysia. Keywords: Tax Compliance, Tax Morale, Tax Awareness, Tax Penalty, Tax Knowledge. © 2020 by Advance Scientific Research. This is an open-access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/) DOI: http://dx.doi.org/10.31838/jcr.07.11.80 INTRODUCTION May, Grab Car was introduced and their company headquarters Presently, Grab is in the pursuit of becoming the largest moved to Malaysia. In 2015, the Grab Bikes and Grab Car services transportation medium and accomplishing the highest revenue were launched in the Philippines. In 2017, Grab Family was worldwide compared to others, with revenue amounting to US$1 introduced and later in March 2018, Grab made a decision to billion (RM4.15 billion). In 2019, Grab anticipates doubled merge with Uber's Southeast Asian operations. As a result, Grab revenue of more than US$1 billion (RM4.15 billion) upon its joint has effectively become the only ride-sharing service in the venture with Uber in the previous years (‘Grab expects to double region. Now, Grab has covered seven countries that include the revenue in 2019’, 2019). In Malaysia, there are 300,000 Grab car Philippines, Indonesia, Myanmar, Thailand, Vietnam, Cambodia, drivers with a minimum ride of RM5 and to date, Grab in and Malaysia. Other than providing e-hailing services, Grab has Malaysia has accumulated revenue of RM3.75 million (Nizar also embarked upon providing Grab Food (food delivery) and Ahmad, 2019). Starting the year 2019, Grab car drivers are Grab Express (parcel delivery) across the countries. required to register for the PSV license, which is a newly implemented e-hailing rule in Malaysia that costs RM800. Every country in the world has a different tax system; however, Nevertheless, out of 300,000 drivers, only 10% are currently the purpose of the tax system is similar for all countries, both registered with the PSV license (Nazrin, 2019). Besides, Grab car developed and developing, because taxes are the main sources of drivers are also required to pay taxes if the income they generate revenue for each country which are beneficial for the country’s from providing the service exceeds RM35,000. In fact, many development and its citizens. In the context of Malaysia, there are users prefer to use Grab cars as their medium of transportation; two types of taxes imposed, namely direct taxes and indirect hence, Grab car drivers, either part-timers or full-timers, must taxes. Direct taxes comprise the income tax, stamp duty, comply with the new rules by which they need to disclose their petroleum income tax, and real property gain tax. Meanwhile, Grab service income to the Inland Revenue Board Malaysia indirect taxes consist of the sales tax, service tax, as well as (IRBM) (‘Taxman tells Uber, Grabcar drivers to declare earnings’, export and import duty taxes (Income Tax Act, 1967). 2017). As such, this can help increase the country’s revenue In 2001, the government of Malaysia replaced implemented the alongside monitoring the Grab car drivers’ tax compliance. This Self-Assessment System (SAS) to replace the Official Assessment issue was widely discussed among of the policy makers System (OAS). In the Self-Assessment System, there are stages especially the outcomes of the tax compliance level in the local implemented for different taxpayer categories, such as corporate capital market, (Rashid, Noor, & Mastuki, 2015). taxpayers in 2001, followed by businesses, partnerships, and Anthony Tan, who is the youngest brother of the family-operated corporate in 2003, and also salaried individuals in 2004. To Tan Chong Motors, is the owner of Grab Car. Originated from compare the two systems, the Official Assessment System is done Singapore, Grab Car offers services ranging from ride-hailing, manually, whereby the taxpayers do not need to be ride-sharing, food delivery, to logistics via its application. His knowledgeable of their tax liability computation because the business began with the “My Teksi” application that was IRBM provides their annual tax returns based on the annual introduced in 2012 in Malaysia. In August 2013, his business assessment of tax income and expenses by applying tax laws and expanded, covering other Asian regions including the Philippines, regulations. Meanwhile, for the Self-Assessment System, it is Singapore, and Thailand in October. In 2014, Grab continuously necessary for taxpayers to have knowledge of taxation because expanded through collaboration with HDT Holdings; they not the system uses an electronic version for taxpayers to declare only introduced 100 electric taxis in Singapore, but they also and report their income and also to pay their taxes within the launched Grab service in Ho Chi Minh City and Jakarta. Later in stipulated time (Mohd Rizal, 2012). Consequently, the Journal of critical reviews 445 TAX COMPLIANCE MOTIVES AMONG GRAB CAR DRIVERS IN MALAYSIA implementation of the Self-Assessment System not only reduces taxpayers’ awareness about the tax rules and regulations the burden of the tax authority and boosts the collection of (Oladipupo & Obazee, 2016). As stated by Bird (2014), income tax, but it has also simplified the tax process further knowledge is the learning process of understanding something because no physical documents are needed for the process (Palil that might also be influenced by motivation and other external & Mustapha, 2011). factors in relation to the information provided. In this case, taxpayers’ knowledge may influence their understanding of Table 1.1: Federal Government Revenue fulfilling their tax obligations accordingly. Furthermore, tax Category of tax 2018 (RM million) 2019 (RM million) awareness among taxpayers is also helpful for increasing their Tax revenue 174,700 176,152 compliance level (Muliari & Setiawan, 2011); the higher the tax Direct tax 133,474 135,068 awareness, the higher the level of tax compliance (Artiningsih, Indirect tax 41,226 41,084 2013). In order to ensure tax awareness, tax authorities must Non-tax revenue 61,760 85,662 play their roles effectively such as providing programs for the Total revenue 236,460 261,814 public in order to monitor the compliance rates and enhance the (Source: Ministry of Finance Malaysia, 2019) level of tax awareness. Hence, this study will examine the factors affecting tax As can be seen in Table 1.1, tax revenue contributed to almost compliance among Grab car drivers in Malaysia by focusing on 74% of the total revenue of the Federal Government in the years factors such as tax knowledge, tax awareness, tax morale, and tax 2018 and 2019. The main source of revenue, which is the direct penalty. It is anticipated that these four factors will influence tax tax, has a higher contribution compared to the indirect tax as the compliance among Grab car drivers in Malaysia. second source. According to OECD (2018), taxation is the major contributor to the country’s revenue source and it is also helpful LITERATURE REVIEW for the country’s continuous development. 1) Tax Knowledge and Tax Compliance Previous studies in Malaysia have emphasized that tax Nevertheless, tax compliance is still an ongoing issue due to the knowledge will determine a taxpayer’s compliance behavior fact that no one is as keen on paying taxes (Ali-Nakyea, 2014). under the tax system which called the self-assessment system Tax compliance is referred to as the willingness of taxpayers to (Loo, 2006). This is supported by other studies, which suggest disclose, report, and pay their tax liability according to the tax that possessing tax knowledge will encourage high rates of laws and regulations without any enforcement activity from the compliance (Kirchler, 2006). Through education, a taxpayer’s tax authority (James & Alley, 2012). Besides, tax compliance also knowledge can be enhanced (Alabede, Zainol Ariffin, & Idris, ensures that taxpayers such as individuals, businesses, and 2011); it helps the taxpayer to understand the tax requirements practitioners are responsible in terms of fulfilling and complying in filling the tax form before paying a tax. The issue arising is that with their tax obligations (SARS, 2012). Nevertheless, the taxpayers nowadays are still lacking tax knowledge or have interaction between taxpayers and tax authorities in dealing with limited knowledge regarding taxation.