Tax malfeasance of high net-worth individuals in Malaysia: tax audited cases

Author:Rasyidah Che Rosli, Lai Ming Ling, Roslani Embi
Position:Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia
Pages:155-169
SUMMARY

Purpose This paper aims to analyse the profiles of high net-worth individuals (HNWIs) who were caught for tax malfeasance during a tax audit and to examine factors that influence tax malfeasance among HNWIs in Malaysia. Design/methodology/approach This paper examined 235 HNWIs who were involved in tax malfeasance after audited by the Inland Revenue Board Malaysia from year 2009... (see full summary)

 
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Tax malfeasance of high
net-worth individuals in Malaysia:
tax audited cases
Rasyidah Che Rosli
Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia
Lai Ming Ling
Faculty of Accountancy and Accounting Research Institute, Universiti Teknologi
MARA, Shah Alam, Malaysia, and
Roslani Embi
Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia
Abstract
Purpose This paper aims to analysethe proles of high net-worth individuals (HNWIs) who were caught
for tax malfeasance duringa tax audit and to examine factors that inuence tax malfeasance among HNWIs
in Malaysia.
Design/methodology/approach This paper examined 235 HNWIs who were involved in tax
malfeasance after audited by the InlandRevenue Board Malaysia from year 2009 to 2013. A research model
was developed to examine the inuence of four independent variables which are tax rate, level of income,
source ofincome and taxation performed by tax professionalson tax malfeasance.
Findings Multiple regression was used to test the proposed research model. The ndings show that
source of income and taxation performed by tax professionals inuence tax malfeasance among HNWIs in
Malaysia. This study also uncoversno signicant relationshipbetween tax rate and level of income with tax
malfeasanceof HNWIs.
Originality/value This study could be the rst in Malaysia that has used actual audited data in
examining taxmalfeasance among HNWIs. This study providesimportant insights not only to the Malaysian
tax authorities but also to tax authoritiesand tax researchers in other parts of the world, given the fact that
tax malfeasanceof HNWIs is a prevalent and universal problem.
Keywords Tax audited cases, High net-worth individuals, Tax malfeasance
Paper type Research paper
1. Introduction
The tax malfeasance issue among high net-worth individuals (HNWIs) is a major concern
for tax authorities and governments around the world. According to Organisation for
Economic Co-operationand Development (OECD) (2009), HNWIs pose signicant challenges
to their tax administration because of the complexity of their tax affairs, their revenue
contribution, their opportunity for aggressive tax planning and the impact of compliance
behaviour on the integrity of thetax system. With the existence of tax havens and offshore
nancial centres, tax malfeasance among HNWIs surged signicantly. The tax scandals
exposed by Luxembourg and the Panama Papers cases has caused great concerns for the
tax authorities. The prevalenceof tax malfeasance among HNWIs has signicantlyaffected
tax revenue collection, economic and social developments and widen the tax gap between
High net-worth
individuals in
Malaysia
155
Journalof Financial Crime
Vol.25 No. 1, 2018
pp. 155-169
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-11-2016-0070
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm

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