Monthly Tax Deduction as Final Tax: The Case of Malaysian Employees

Authors

  • Idawati Ibrahim Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia https://orcid.org/0000-0002-7505-4260
  • Zainol Bidin Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia
  • Natrah Saad Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia
  • Muzainah Mansor Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia

DOI:

https://doi.org/10.32890/ipjaf.2020.4.2.103

Keywords:

Monthly tax deduction, Final Tax, Withholding Tax, Employment Tax, Malaysia

Abstract

Malaysia introduced Monthly Tax Deduction (MTD) as final tax system so that salaried earners can be excluded from reporting their employment income. However, the system is voluntary, and the take-up rate is low. This study was undertaken to examine employees’ issues on MTD’s implementation as the final tax system in Malaysia. This study comprises a case study on MTD implementation at two institutions that remain anonymous due to confidentiality. Data were collected from 64 responses from open-ended questionnaires to employees at both institutions. The data was analysed using thematic analysis. Findings from the analysis revealed that employees’ hesitation to such a system is more apparent. There are three main issues discovered from this study which are: lack of knowledge on MTD as final tax among employees, a burden on claiming tax reliefs and the accuracy of MTD calculation; and employer’s readiness. The findings provide evidence to the IRBM. It will provide a good foundation for the IRBM to strategise mechanisms to enhance the system’s implementation. For instance, the information on low readiness among employers may call for a roundtable discussion between the tax authority and employers. This would help both parties to discuss possible ways to resolve the issue. Other implications and recommendations for policymakers were also discussed in this paper.

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Published

2020-04-01

How to Cite

Ibrahim, I. ., Bidin, Z., Saad, N., & Mansor, M. (2020). Monthly Tax Deduction as Final Tax: The Case of Malaysian Employees. Indian-Pacific Journal of Accounting and Finance, 4(2), 24-33. https://doi.org/10.32890/ipjaf.2020.4.2.103

Issue

Section

Main Section