Tax malfeasance of high net-worth individuals in Malaysia: tax audited cases

Abstract

Purpose

This paper aims to analyse the profiles of high net-worth individuals (HNWIs) who were caught for tax malfeasance during a tax audit and to examine factors that influence tax malfeasance among HNWIs in Malaysia.

Design/methodology/approach

This paper examined 235 HNWIs who were involved in tax malfeasance after audited by the Inland Revenue Board Malaysia from year 2009 to 2013. A research model was developed to examine the influence of four independent variables which are tax rate, level of income, source of income and taxation performed by tax professionals on tax malfeasance.

Findings

Multiple regression was used to test the proposed research model. The findings show that source of income and taxation performed by tax professionals influence tax malfeasance among HNWIs in Malaysia. This study also uncovers no significant relationship between tax rate and level of income with tax malfeasance of HNWIs.

Originality/value

This study could be the first in Malaysia that has used actual audited data in examining tax malfeasance among HNWIs. This study provides important insights not only to the Malaysian tax authorities but also to tax authorities and tax researchers in other parts of the world, given the fact that tax malfeasance of HNWIs is a prevalent and universal problem.

Citation

Che Rosli, R., Ming Ling, L. and Embi, R. (2018), "Tax malfeasance of high net-worth individuals in Malaysia: tax audited cases", Journal of Financial Crime, Vol. 25 No. 1, pp. 155-169. https://doi.org/10.1108/JFC-11-2016-0070