Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia

| Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia |

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Table of Contents

Executive Summary 3
Introduction………………………………………………………………………………………..4
Tax Compliance, Tax Evasion and Tax Audit…………………………………………………….4
Tax Audit in Malaysia…………………………………………………………………………….6
Organization Structure…………………………………………………………………………….8
Tax Audit Process…………………………………………………………………………………9
Tax Audit: Constraints and Problems……………………………………………………………11
Recommendations………………………………………………………………………………..16
Conclusion……………………………………………………………………………………….18
References……………………………………………………………………………………….19
Appendix………………………………………………………………………………………...20

Executive Summary The Malaysian tax system follows the concept of self-assessment system (SAS). Under the SAS, the government trusts and gives taxpayers full responsibility to calculate, to pay and to report their tax due on their own. The success of SAS not only depends on the good tax administration but also depends on the taxpayer awareness, which is indicated by the taxpayer compliance in fulfilling his obligation. In order to enhance the level of tax compliance, the Inland Revenue Board of Malaysia (IRBM) considers that it can be achieved by law enforcement besides tax consultation and tax service. Law enforcement comprises of tax audit, tax investigation and tax collection. Tax audit becomes important since it can cause a deterrent effect to increase taxpayer compliance. Tax audit plays an important role in determining the extent to which taxpayers can be made to comply with the laws and regulations. Tax audits are particularly useful in checking the most subtle forms of non-compliance i.e. evasion and avoidance. However, the low audit coverage of the IRBM, especially on field audit, has been below 5% and complaints from taxpayers and tax agents have been raised on the field audit approach. What kind of constraints and problems does the IRBM have in conducting tax audit? The research paper purposes are to identify constraints and problems in conducting tax audit in Malaysia and to give possible recommendations to overcome constraints and problems. The concluding remark of research paper is that in conducting tax audit, the IRBM has internal constraints which are categorized under audit coverage and audit technique. The low of audit coverage and lack of qualified officers are two main factors which affect the level of tax compliance. Through the observation and inquiry on Japanese Tax System, some possible recommendations has been suggested to increase the effectiveness and efficiency of tax audit.

Introduction In the era of Self-Assessment System (SAS), tax audit is a routine activity. The introduction of SAS could increase noncompliance risk because of its voluntary nature, but tax authorities will be able to enhance voluntary compliance through tax audit. Since the introduction of SAS for corporation in 2001, Malaysian tax authority has emphasized tax audit in order to ensure the compliance at optimum level. However, there are still challenges for tax authority to need further improvement i.e. audit coverage is still at lower level (below 5%), human resource development and short term versus long term target/goal dilemma. What is the best audit approach that leads to higher tax-compliance? Tax authorities have internal and external constraints to tackle with. We will look into the current audit approach/practice of the Inland Revenue Board of Malaysia (IRBM) on corporate taxpayer, which has contributed more than 70% of total direct tax revenue collection. Tax Compliance, Tax Evasion and Tax Audit
According to Andreoni, Erard & Feinstein, tax-compliance should be defined as taxpayer’s willingness to obey tax laws in order to obtain economy equilibrium of a country. While Kirchler states it as the most neutral term to describe taxpayers’ willingness to pay their taxes. McBarnet suggested that tax-compliance should be perceived in three different ways: i) committed compliance – taxpayers’ willingness to pay tax without complaint; ii) capitulative compliance – reluctantly giving in and paying taxes; and iii) creative compliance – engagement to reduce taxes by taking advantages within the bracket of the law. While OECD stated that tax- compliance relates to the extent to which a taxpayer meet obligations such as register in the tax system, timely or lodgment of requisite taxation information, reporting of complete and accurate information on actual income and finally paying the tax indicated in the return form in the stipulated time. Therefore, taxpayer is considered to be compliant with the tax law when the annual tax liability is reported and right tax liability is paid. Otherwise, noncompliance with tax law will arise when taxpayers fail to meet those obligations.
Tax noncompliance has been an important issue for IRBM, as its impacts on both equity and efficiency of Malaysia economy. According to Elfers, Weigel and Hessing, noncompliance- can be defined as filing a tax return which deviates from what the law requires, given the situation of the taxpayer. Noncompliance with tax laws includes failure to declare actual taxable income and failure to claim the rightful deductions. Meanwhile tax evasion can be defined as willful noncompliance. It is preplanned and is committed to promote economic gain or occupational success for the perpetrator. Tax audit plays a significant role in curbing the tax evasion and also aims to promote voluntary tax compliance in SAS. If taxpayers play a bigger role through SAS, tax audit will compel them to do their tax return honestly and properly. Asian Development Bank Tax Conference suggested audit as one of several instruments to improve tax compliance. IRBM also suggests that one way to assess and to increase the level of tax compliance is through tax audit. IRBM has defined the tax audit as an examination of a taxpayer’s business records and financial affairs to ascertain the right amount of income which should be declared, and the right amount of tax, which should be calculated and paid in accordance with the provisions of laws and regulations. IRBM also suggested that the audit activity is one of the measures undertaken to educate and create awareness of taxpayers towards their rights and responsibilities. Kirchler (2009) has mentioned that “objective audit probabilities affected only taxpayers with greater temptation to cheat, but duty to be honest influenced tempted taxpayers as much ordinary taxpayers.” He further argued that it is not the actual audit probability which influence tax compliance, but the probability of detection of tax fraud and therefore it is subjective estimation which determines behavior. While, according to Ho and Lau (1999), the purpose of tax audit is to educate taxpayers on the importance of voluntary compliance, deter tax evasion, and more importantly facilitate the operation of the SAS. Loo (2006) mentions that apparently, tax structure features such as tax rate, audit rate and penalty rate are found to have influenced the reporting compliance of taxpayers. In order to deter tax evasion and to file tax return correctly, taxpayers in SAS will seek advice from tax agents and also seek assistance of the tax authority, as they themselves choose to be compliant. All three parties, tax authorities, tax agents and taxpayers, influence tax compliance.

Tax audit in Malaysia
The implementation of tax audit in Malaysia started as early as 1993 under the Official Assessment System (OAS). In ensuring that taxpayers adhered to their responsibilities in paying the tax due by the due date, several proactive actions were taken to initiate a simpler tax audit approach. It started with the introduction of the Special Action Unit in 1993 which focused on surveillance activities such as street surveys to increase the compliance rate, expand the tax base and collect taxpayers’ basic information. Street surveys are carried out through visits by IRBM officers to the specific business area, such as new business area, high risk strategic areas, etc. Under SAS, tax audit activities were intensified and categorized into field audit and desk audit, in order to examine tax returns to make sure whether the tax liability is correctly reported. The main difference between OAS and SAS is the audit approach based on deemed taxation and audit work. Under OAS, every return form had to be audited through desk audit before the deemed taxation process was done manually and assessment form was issued to the taxpayer. However, under SAS the deemed process is made through system at the Processing Centre and only certain cases will be audited through either desk or field audit after the case selection based on the certain criteria. The tax audit intensity under SAS was due to the increasing number of tax audit cases to be finalized from year to year. The number of cases has increased significantly as shown below:

Field audit | 2007 | 2008 | 2009 | 2010 | Cases audited | 6,428 | 13,985 | 13,619 | 15,813 | Cases resolved | 6,859 | 8,459 | 7,942 | 8,119 | Taxes and penalties | RM745.49 mil | RM631.58 mil | RM604.19 mil | RM621.23 mil | Desk audit | | | | | Cases resolved | 272,316 | 1,044,480 | 1,391,718 | 1,724,139 | Taxes and penalties | RM665.08 mil | RM1,065.58 mil | RM2,450.76 mil | RM2,249.39 mil | No. of staff assessment/audit department | 4,745 | 5,183 | 5,501 | 5,581 |
These numerical evidence, showed the seriousness of IRBM in intensifying tax audit to enhance tax compliance. Significant increase in number of cases audited for field audit after year 2008 resulted from restructuring program and measures implemented by the management such as creating additional departments and divisions based on specific industries. The management also increase the number of cases audited from 8 to 15 cases per year for every officer and reduced the number of officer in each group from 4 to 2 officers. Recruitment was prioritized over assessment/audit department and the number of auditors increased by 18% during the period. However, the number of cases resolved has not significantly increased, which could be due to the limited number of qualified staffs, lack of supervision and also lack of cooperation from taxpayers. These factors were to cause delay of audit cases resolved in more than one year as shown by decrease in number of cases resolved in 2008 and 2009. While under desk audit, the significant increase on the number of cases resolved and amount of taxes and penalties mainly due to the management issued new work procedures especially in handling long outstanding cases. The procedures have been simplified and need to issue additional assessments immediately when the time frame given to taxpayers due. Organization Structure
Since the development of world and Malaysian economics, the circumstances surrounding tax administration have also changed in the following ways: i) Increase in number of taxpayers. ii) More complexity and geographical expansion in business transactions iii) More complex ways for tax evasion iv) Globalization and advancement of information technology in business transactions.
In order to cope with the changing environment, IRBM has structured its audit team to be more specialized and to create expert in various fields.

1) Multinational Tax Department
Proper implementation of transfer pricing and multinational taxation requires special knowledge, experience and a work system that differ from those necessary for the examination of general cross-border transactions. A unit under Compliance Tax Department has been setup with minimum number of staffs. To enhance the examination system, another department has been established in 2007 with three main divisions/functions i.e. Advance Price Agreement (APA), Multinational Audit and Transfer Pricing.

2) E-commerce
With the popularization of the internet and advent of electronic commerce, IRBM has created E-commerce Unit under Compliance Tax Department in 2009. The unit is comprised of one Director and three staffs and has taken Professional Team for E-Commerce Taxation (PROTECT) of Japan as their role model in developing their skills on computers and e-commerce business. Several trainings have been conducted in Malaysia by experts from PROTECT to provide their experiences and techniques in carrying out e-commerce audit.

3) Corporate Tax Department
The department is a well established and considered as a center of excellence of IRBM. In creating expertise in various fields, the department has been divided into several divisions according to the specific industries.

Tax Audit Process
Under SAS, IRBM has targeted all taxpayers to be audited. This can be accomplished if each taxpayer is audited at least once in every five years through various types of audit such as desk audit, field audit or street survey. In essence, it was reported that IRBM aimed to audit 20% of taxpayers in a year, which covered 5% by field audit and 15% by desk audit respectively, with the exercise completed every five years (IRBM, 2009).
IRBM ensures that tax audit shall be conducted fairly and competently in enhancing tax compliance. Taxpayers are expected to voluntarily submit their tax returns through SAS, but non-compliance would lead to possible misuse of the system. To avoid this, any tax returns that are not submitted on time or being manipulated are subjected to tax audit. Some taxpayers expect tax auditors not to be strict on them as they are not really tax knowledgeable. This often happens on small and medium taxpayers as their awareness on tax are low due to lack of initiatives or improper guidance from tax agents. Taxpayers also rely on tax auditors to properly guide and educate them during the tax audit and it should be carried out fairly and transparently. As to achieve the different priorities, IRBM has issued Tax Audit Framework in 2007 and revised in 2009.
The Framework is to ensure that tax audit shall be carried out in a fair, transparent and impartial manner and outline the rights and responsibilities of audit officers, taxpayers and tax agents in respect of a tax audit. It also lays out the selection criteria for tax audit cases, the types of tax audit, the finalization process of tax audit cases and other related matters. IRBM has outlined five tax audit selection criteria as follows: i) Risk analysis of the taxpayer. ii) Information from the third party. iii) Based on specific industry selection. iv) Specific issues on certain taxpayer. v) Based on location of the taxpayer premises or registered address and others.
The cases are chosen from the criteria above, which are determined by Tax Compliance Department and mostly based on criteria (i) and (iii). Normally, business sectors are usually selected for tax field audit, while other groups of simpler income such as co-operative and trust body are put under desk audit. As the desk audit is for less complex cases it may not require a tax audit visit. Desks audits are normally concerned with straightforward issues or tax adjustments which are easily dealt with via correspondence. A tax payer may be called for an interview at IRBM office if further information is required.
As for the field audit it will be done at the taxpayer’s premises. The time required to complete an on-site examination of records is two to three days. However, the audit time frame may be extended depending on the following factors: the size of the business and the complexity of the business transactions; the form in which the records are kept; or the extent of cooperation from the taxpayer.
Other related issues highlighted are on the rights and obligations of parties involved in the tax audit. An audit officer must at all times carry out their duties professionally according to the Tax Audit Framework. All issues raised shall be explainable and supported by proper documents and in accordance with the provision of the Act. He should always explain properly so that any issue can be resolved without any conflicts between both parties.

Tax audit: Constraints and Problems Tax audits are burdensome and costly not only for tax authority, but also for tax agents and taxpayers. In Malaysia, several issues and problems related to tax audit were raised officially through a tax dialogue between IRBM and professional accounting bodies. The complaints were raised prior to the issuance of Tax Audit Framework. IRBM has taken some measures to mitigate the complaints such as restructuring program and development of internal monitoring system. Certain improvement has been noticed but need further improvement especially on the implementation of the monitoring system. The issues raised were as follows:- i) There was a lack of transparency and consistency in the IRBM approach to tax audits. There were cases where different treatments were adopted on the same subject matter which was handled by different officers. Often, the tax auditors reversed their past confirmations and verbal promises made during the course of tax audits. It also reported that some of the tax auditors did not conduct the tax audit in a professional manner. Most of them had preconceived mindset that the taxpayers were already guilty and their visit was meant to confirm the offence.
Audit is not just about the fact and knowledge but also involves human judgment and inter-personal skill of the officers. In relation to this, IRBM has introduced the Tax Audit Framework as a guide for both taxpayers and tax officers. The problem arose could be because of misunderstanding between taxpayers and officer in-charge as a result of lack of information on taxpayers’ responsibilities and wrong information from third parties. In most of the cases, taxpayers often think that tax treatment on companies of the same industries will always be the same regardless of the fact of each case. They also have to know the audit working procedure which involves several levels of approvals and only written confirmation will be accepted. But at the same time, IRBM shall be more efficient in internal processes. In terms of preconceived mindset, it is hard to tell because tax cases have been selected based on different criteria which listed in the Framework, the officer only can explain in general without disclosing the details as why and how the company being selected.

ii) In some audit cases, the tax auditors were not familiar and knowledgeable in book-keeping transactions and accounting principles. This has created a lot of difficulties to tax payers as they needed to spend unnecessary time in explaining the book-keeping transactions to the tax auditor. There were also instances where some of the tax auditors tended to treat different companies in the same manner notwithstanding the different nature of the business/industry/different environment in which the taxpayers were involved in. Some of the tax auditors were not willing to accept commercial justification even though detailed explanations with supporting documents were provided.
All officers have equipped with the basic knowledge in book-keeping and accounting principles through compulsory training courses provided by Malaysian Taxation Academy (MTA) i.e. Advance course in accounting and auditing and Auditing for companies. In addition, most of the officers have accounting background in their undergraduate qualification. However, in practice, there are various book-keeping software which differ from one company to another even within the same industry. It is necessary for taxpayers to explain how they record their transaction properly with proper supporting documentation. In auditing, understanding the business activities and how it being recorded is very important in determining tax issues. As mentioned in the Tax Audit Framework, it is necessary for taxpayers to provide necessary assistance to the officer in-charge within the scope of audit. It is also important for auditors to explain professionally on their duty and taxation. Taxation is not just about supporting documents and commercial justification but more importantly the substance of the transaction.

iii) Some of the tax auditors were still making tax adjustment without explaining the rationale for making such adjustments and adjustments made were based on findings by the tax auditors which were not backed by valid evidence.
In this case, it mostly happens when taxpayers do not have proper supporting documents or issues are in gray areas. It is very difficult for tax officer to explain in details as taxpayers always think in the business perspective and not taxation. The proper audit procedure should be taken by the tax officers for example serving a notice to taxpayers for not keeping proper or adequate documents. As a result, increasing in number of cases has been brought up to the court, Special Commissioner of Taxation. Due to the increase in court cases, it require more time in preparing court cases documentation and hearing, hence less time spent for ongoing audit cases.

iv) Regarding the issue of time frame and scope of the audit, it was reported that some tax auditors had delayed the finalization of some tax audit cases and took more than a year to finalize them, even though IRBM had stated earlier that the audit cases should be finalized within three months from the date of commencement of tax audit
Audit finalization within a time frame has been one of the main issues. By delaying the audit finalization, it will affect the audit performance and its impact on tax compliance. Several factors has been identified that cause to the delay, i.e. quality of the staff, taxpayers cooperation, conflict on management target. All the above issues should be addressed by IRBM in proper manner from time to time. These are the duties of the officers to carry out their job according to the Tax Audit Framework and to strengthen the administration such as improving the audit process and human resources capabilities. At the same time, IRBM also needs to increase tax education programs for taxpayers explaining their roles, responsibilities and rights as taxpayers.
Internally, IRBM has also been facing certain constraint mainly relating to human resources, where inadequate number of qualified staff to cope with the fast development in current business environment and increase in number of taxpayers. This has resulted in certain issues raised by taxpayers as mentioned above. In order to achieve the purpose of tax audit to increase the compliance level, there are certain areas or issues that still need to be further explored and strengthen. There are:-

Audit coverage
Currently, the target set by the management is to cover 20% of the total tax returns, of which 5% is for field audit and the balance for desk audit. As of 2010, the total audit cases carried out and resolved were 26% which was above the target set by the management. However, the coverage was mainly contributed by desk audit, while field audit had contributed less than 1%. As we know, desk audit is carried out on simple and straightforward cases and with limited access of documents. Therefore, generally we can say that the effect of desk audit towards the level of tax compliance is not as high as that of field audit. Currently, Auditors are divided into several groups and are subdivided into groups to deal with small and medium or large corporation based on their experience and capabilities.
The field audit is basically carried out in a team with a minimum of two officers depending on the size and complexity of the taxpayer’s business. With limited number of officers available, it is difficult for IRBM to find solution on this issue.
Another reasons that may cause the low coverage of the field audit are that the years of assessment audited by the officer in charge and lack of audit scope to focus. Normally the number of year of assessment covered was one to three years and can be extended to six years if the officer in-charge finds it necessary to extend. In case of extension of the period, it will take more time for the officer in-charge to resolve the audit case. This definitely will affect his workload through-out the year and the impossibility to resolve the case and meet the target will be higher (i.e. to resolve each audit case within twelve months and four to ten cases within calendar year depending on the size of cases). Officers also find that there is conflict between number of cases and revenue collection set by management, which has resulted in delaying the audit case. They believe that good auditors shall collect higher revenue through audit case.
In certain cases, there were tax-payers audited consecutively after one field audit case was resolved. It was carried out for different year of assessment but taxpayers still raised queries and dissatisfactions as they feel like to be treated unfairly, and there are so many taxpayers out there to be audited. As for the audit officer in-charge, it was quite difficult to explain to taxpayers what are the criteria for the case selection.
Since the field audit coverage is very low, taxpayers have the possibility of not being audited within the time frame of five or six years. It is necessary for IRBM to look into possible alternative which can contribute to the higher coverage rate in field audit.

Audit Techniques
Audit techniques, knowledge and negotiation skills are the main assets of tax officers to distinguish between good and average officers. In audit process, it involves a lot of decision making from the start of selection of the audit cases to the resolving of the cases. IRBM has taken measures and conducted training to every officer from junior to the higher level which carried out at MTA.
The training courses are mostly provided on technical knowledge of taxation as all officers need to take preliminary and advance courses covering tax law and administration, accounting and auditing. Then, every auditor is required to attend another audit course with practical exercise. After completing the required courses, officer will attend courses (technical and non-technical) on selection basis but they are limited to certain number of people. Therefore, not every officer has the opportunity to attend courses formally but to learn through self-initiative especially for junior officers who have limited experiences.

Recommendations
Audit coverage
In order to increase the audit coverage, particularly the field audit, certain measures or possibilities may be suitable to implement such as the structure of the audit group and the number of years of assessments. In respect of audit group structure, it may possible to allocate one officer for one audit case especially in small and medium taxpayers with simple and straightforward cases. This practice has been implemented successfully in Japan for long time. With this practice, it will increase the number of field audit cases as small and medium enterprises comprise of more than 70% of corporate taxpayers. At the same time, management also can increase gradually the target on number of cases for each officer. However, it may risk the integrity of the tax officer and open for possible ‘attack’ by taxpayers.
Another aspect to be implemented is that the number of years of assessments should be limited to one or two year of assessments only and focused audit should be carry out instead of checking every details of the business transactions. Auditors should determine the area or scope of audit in planning stage or during the first interview with the taxpayer. Most importantly, it will expedite the audit process cycle and more audit cases can be carried out. There is need for the auditors to be flexible in handling audit cases as each case is different as compared to the knowledge which they acquired from training.
Group audit can be introduced for taxpayers who has group of companies. From this practice, simultaneous audit can be made without taking much time of taxpayers and officers themselves in understanding taxpayers business. However, there is still a challenge in adopting it in current situation, since every audit team or unit has always competed to each other to achieve its own target. It is difficult between the teams to cooperate each other unless management has the initiative. Therefore, it is better to implement the group audit on special cases only and should be closely monitored by the management on the progress and coordination between each group.
Last recommendation is on the role of a supervisor. It is important for supervisors to guide and closely monitor all of their subordinates to ensure their cases run smoothly. The supervisor should also act as a motivator and keep the relationship in harmony. Supervisor should guide their officers in each audit process from planning stage to the settlement. For example, he may follow one of audit visit and guide the officer in making quick decision if the case different from what they planned. He should always share his knowledge and experiences in handling audit cases.

Audit Techniques
Generally, the training program provided meets the purposes of the organization as tax collector or auditor of the country. However, there are always rooms for improvement in order to maximize the effectiveness and efficiency of the officers and reduce the complaints internally and externally.
The most important is to carry out ‘knowledge sharing’, which is to share the input of those who attended the courses to the other members of the department and in small group basis. So the learning process will always be active in the organization. The changes may make officers to take some time in preparing the materials, however it will certainly benefit all officers to be involved in the process of knowledge sharing.
It is also good to have compilation of previous cases resolved to use as reference by auditors.
Experience in handling many audit cases, knowledge sharing among auditors and continuous learning program may expedite the acquisition and improvement of their technical knowledge, negotiation and audit skills.

Conclusion
Under SAS, audit is one of the most important aspects to create public awareness and increase the level of voluntary tax compliance. With the rapid changes in business environment and complexity, the audit structure and quality of the officers also need to improve from time to time. The main constraints faced by IRBM are shortage of staff to be developed as qualified tax auditor in every level and aspect. These factors have led to lower coverage of audit cases, which is important to give impact on compliance level. Several measures practiced by developed country like Japan can be introduced to improve the audit process in terms of technical aspect and human resources. Hopefully, with the small and few recommendations will improve the audit process and increase the level of tax compliance in Malaysia.

References 1. Asian Development Bank Tax Conference (2001). Key Issues in Income Tax: Challenges of Tax Administration and Compliance. 2. Coleman, J. (1987). Toward on Integrated Theory of White Collar Crime, American Journal of Sociology, 93: September: 406-439. 3. Elfers, H., Weigel, R., Hessing, O. (1987). The Consequences of Different Strategies for Measuring Tax Evasion Behaviour, Journal of Economic Psychology, 8: September: 311-337. 4. Ho, D. & Lau, P. (1999), Tax Audit in Hong Kong, The International Tax Journal, Summer 1999,25,3, pp. 67-71. 5. Inland Revenue Board of Malaysia (2009). Tax audit framework. 6. Kamara, I. (2010). The effect of tax reforms and enforcement policies on taxpayer compliance rate in Sierra Leone: Lessons from Ghana and other countries. (Unpublished master’s thesis). National Graduate Institute of Policy Studies, Tokyo, Japan. 7. Kirchler, E. (2009). The economic psychology of tax behaviour. New York: Cambridge University Press. 8. Loo, E. C. (2006), Tax Knowledge, Tax Structure and Compliance: A report on a Quasi-Experiment, New Zealand Journal of Taxation Law and Policy, Volume 12 No.2, pp. 117-140. 9. Minutes of meeting of Tax Audit Dialogue Session 1/2006 between Inland Revenue Board of Malaysia and Professional Bodies date 14 December 2006 10. Mottikavandar, Haron, H. and Kassipilai, J. (2004, March). Level of Compliance among small business entrepreneurs, Accountant Today, 34-37. 11. OECD (2004), Compliance Risk Management: Managing and Improving Tax Compliance, Forum on Tax Administration Compliance Sub-group, London. 12. The Inland Revenue Board of Malaysia. Annual Report 2007, 2008, 2009 and 2010.

Appendix
Gross collection of Direct Taxes: Year | 2007 | | 2008 | | 2009 | | 2010 | | Category | RM’Bil | % | RM’Bil | % | RM’Bil | % | RM’Bil | % | Company | 37.57 | 50.29 | 46.90 | 51.74 | 40.27 | 45.55 | 43.80 | 50.64 | Petroleum | 20.45 | 27.38 | 24.19 | 26.69 | 27.23 | 30.80 | 18.71 | 21.63 | Individuals | 11.59 | 15.52 | 14.35 | 15.83 | 15.57 | 17.61 | 17.80 | 20.58 | Others | 5.09 | 6.81 | 5.21 | 5.74 | 5.33 | 6.04 | 6.19 | 7.15 | Total | 74.70 | | 90.65 | | 88.40 | | 86.50 | |

Number of staffs: Year | 2007 | 2008 | 2009 | 2010 | Category | | | | | Top management | 23 | 23 | 28 | 33 | Information Technology | 773 | 716 | 747 | 760 | Assessment | 4,745 | 5,183 | 5,501 | 5,581 | Legal | 29 | 74 | 76 | 86 | Accounting | 246 | 283 | 285 | 289 | Administration | 3,195 | 3,297 | 3,305 | 3,337 | Total | 8,981 | 9,576 | 9,942 | 10,086 |

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[ 1 ]. Andreoni, Erard & Feinstein (as cited by Kamara, 2010)
[ 2 ]. Kirchler, E. (2009). The economic psycology of tax behavior. New York: Cambridge University Press.
[ 3 ]. McBarnet (as cited by Kirchler, 2009)
[ 4 ]. OECD (2004)
[ 5 ]. Mottikavandar, Haron & Kassipilai (2004)
[ 6 ]. Elfers, Weigel and Hessing (1987)
[ 7 ]. Mottikavandar et al. (2004)
[ 8 ]. Coleman (1987)
[ 9 ]. Asian Development Bank Tax Conference (2001)
[ 10 ]. Kirchler (2009)
[ 11 ]. Ho and Lau (1999)
[ 12 ]. Loo (2006)
[ 13 ]. Certified Institute of Taxation (CITM), Malaysian Institute of Certified Public Accountant (MICPA), Malaysian Institute of Chartered Secretary (MAICSA) and Malaysian Association of Tax Agents (MATA)

References: 1. Asian Development Bank Tax Conference (2001). Key Issues in Income Tax: Challenges of Tax Administration and Compliance. 2. Coleman, J. (1987). Toward on Integrated Theory of White Collar Crime, American Journal of Sociology, 93: September: 406-439. 3. Elfers, H., Weigel, R., Hessing, O. (1987). The Consequences of Different Strategies for Measuring Tax Evasion Behaviour, Journal of Economic Psychology, 8: September: 311-337. 4. Ho, D. & Lau, P. (1999), Tax Audit in Hong Kong, The International Tax Journal, Summer 1999,25,3, pp. 67-71. 5. Inland Revenue Board of Malaysia (2009). Tax audit framework. 6 7. Kirchler, E. (2009). The economic psychology of tax behaviour. New York: Cambridge University Press. 8. Loo, E. C. (2006), Tax Knowledge, Tax Structure and Compliance: A report on a Quasi-Experiment, New Zealand Journal of Taxation Law and Policy, Volume 12 No.2, pp. 117-140. 9 10. Mottikavandar, Haron, H. and Kassipilai, J. (2004, March). Level of Compliance among small business entrepreneurs, Accountant Today, 34-37. 11 12. The Inland Revenue Board of Malaysia. Annual Report 2007, 2008, 2009 and 2010. [ 1 ]. Andreoni, Erard & Feinstein (as cited by Kamara, 2010) [ 2 ] [ 3 ]. McBarnet (as cited by Kirchler, 2009) [ 4 ] [ 5 ]. Mottikavandar, Haron & Kassipilai (2004) [ 6 ] [ 7 ]. Mottikavandar et al. (2004) [ 8 ] [ 9 ]. Asian Development Bank Tax Conference (2001) [ 10 ] [ 11 ]. Ho and Lau (1999) [ 12 ]