TAX LITERACY- A STUDY ON THE LEVEL AND THE INFLUENCING FACTORS AMONG INDIVIDUAL WITH EMPLOYMENT INCOME IN MALAYSIA

Abstract

Tax literacy is defined as the knowledge which an individual should possess in order to manage the issues concerning personal taxation effectively. It contributes a significant impact on tax issues including moral aspects, tax compliance and tax revenue. The high level of tax literacy is associated with increased government revenue, while low tax literacy will contribute to the deterioration of state revenue. This study aims to look at the level of tax literacy and its determinants upon individual with employment income. The questionnaire was distributed to 250 respondents comprising employees with employment income in the area of Selangor and Kuala Lumpur. The data were analyzed using descriptive statistical analysis and multiple regression tests. Findings revealed that respondents showed satisfactory tax literacy levels related to items under the category of responsibilities and rights as taxpayers, employment income, individual relief, rebates and offenses as well as penalties and compounds. However, the study found unsatisfactory level of tax literacy related to items under the category of child relief. Results of multiple regression analysis indicated that tax literacy has significant positive relationships with factors of age and education level of taxpayers, while factors of marital status indicated a significant negative relationship to tax literacy. Gender factors, positions held, income levels and employment types are insignificant in influencing the level of tax literacy.