Guilt-Minimisation, Religiosity and Tax Non-Compliance Intention: A Study of Small and Medium Enterprise Owners in Malaysia

The importance of small and medium enterprises (SMEs) as the backbone in contributing to national income in Malaysia is undoubted. Despite its importance, their tax non-compliance behaviour has not been given enough attention, particularly on their owners. The Inland Revenue Board of Malaysia (IRBM) had reported statistical evidences pertaining to tax non-compliance among SMEs’ owners. This issue should not be seen solely from the economic approach, but it should also be considered from the non-economic view. Therefore, this study empirically investigates the influence of guilt-minimisation of SMEs’ owners on their tax non-compliance intention as well as to test the moderating effect of religiosity. Employing survey design, questionnaires were randomly distributed to 580 SME owners in Malaysia, with 72.8 percent response rate. The data collected were analysed by using PLS-SEM statistical tool. Findings reveal that denial of injury, denial of victim and condemn the condemner positively influence tax non-compliance intention, whereas religiosity negatively influences tax non-compliance intention. Findings also indicate that the positive relationship between denial of victim and appeal to higher loyalties with tax non-compliance intention became weaker for SME owners with higher religiosity. This study is expected to provide meaningful contributions to the government and tax authorities at enhancing the tax administration and increasing taxpayers’ level of compliance. Suggestions for future researchers are also highlighted.