Compliance Costs of Electronic Tax Filing for Personal Taxpayers in Malaysia

by: Idawati Ibrahim & Jeff Pope, paper presented at the International Conference of Management, Penang, 13-14 June 2011.

The revolution in technology is highly beneficial for tax systems. Compliance costs were reported as high and regressive in many countries and taxes. Electronic filing is an example of techniques utilizing technology aiming at reducing compliance costs of taxation. This study reports preliminary findings on estimates of compliance costs for individual taxpayers in Malaysia under the e-filing system. Mail survey was used to gather the data and was developed based on the renowned Cedric Sandford’s model. On average, it is estimated that the time spent for personal income tax system is about 9.9 hours for manual filing group and about 7.7 hours for e-filing group. Findings on time spent indicate that the median time to submit tax return is statistically less for e-filing group than manual filing group by 0.25 hours. However, the median time to gain assistance is in the opposite direction by 0.37 hours. The monetary costs related to Information Technology (IT) shows that e-filing group spent more IT costs than manual filing group. This paper makes a vital contribution towards enhancing knowledge in compliance costs literature particularly from the effect of technology and the results can serve as a basis for future analysis.