Enhancing Tax Morale via the Implementation of Tax Reward

The issue of leakage of the country's tax revenue due to prolonged non-compliance signals the possibility of other elements to be noted in the existing compliance strategy. A high level of tax morale, especially individuals, is essential in promoting tax compliance behaviour. Tax morale is an intrinsic motivation to fulfil tax obligations which can be driven by compliance strategies implemented by the tax authority. Issues related to enhancing tax morale through tax rewards especially, in developing countries are very lacking in attention among researchers. This study identifies the relationship of compliance strategies towards tax morale among individual taxpayers in Malaysia. Attention is given to three existing strategies that are being implemented in Malaysia, namely enforcement (tax audit and penalty), tax education and treatment by the tax authority, besides exploring the potential implementation of tax reward elements as an effort to encourage tax morale. Data was collected using questionnaire instruments sent to individual taxpayers involving academicians of the Public Institutes of Higher Learning throughout Malaysia. Based on 501 feedbacks received, an analysis was done to answer the research objective. The results of multiple regression analysis found that enforcement, tax education and tax rewards are proven to increase individual tax morale in Malaysia. However, the treatment by tax authority which found insignificant signaled the need for improvement in the quality of services provided. The study succeeded in adding literature regarding tax morale by confirming the influence of compliance strategies towards tax morale as well as highlighting the potential of implementing tax rewards as one of the strategies in Malaysia's tax environment. The findings of this study can be used as a platform to provide relevant inputs for tax authorities as well as policymakers, especially the Inland Revenue Board of Malaysia (IRBM), in assessing, improving and formulating compliance strategies with the mission of cultivating tax compliance, especially among individual taxpayers.