Accounting Research Journal

The influence of religiosity on taxpayers’ compliance attitudes: Empirical evidence from

a mixed-methods study in Malaysia
Raihana Mohdali Jeff Pope
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The influence of religiosity on Religiosity on

taxpayers’
taxpayers’ compliance attitudes compliance
Empirical evidence from a mixed-methods attitudes
study in Malaysia 71
Raihana Mohdali
UTM Razak School of Engineering and Advanced Technology,
Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia, and
Jeff Pope
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Tax Policy Research Unit, School of Economics and Finance,

Curtin University, Perth, Australia

Abstract
Purpose – This paper aims to explore the role of religiosity in determining taxpayers’ attitudes
towards tax compliance and discusses likely explanations for the findings in the context of the
literature.
Design/methodology/approach – A sequential exploratory mixed-methods research design was
used in this study. Data were collected using a self-administered survey which involved approximately
300 individual taxpayers in Malaysia, followed by face-to-face interviews with 14 individual taxpayers.
Majority of the respondents in both survey and interviews were salaried taxpayers, and the remaining
were self-employed taxpayers.
Findings – Religiosity is found to have a minimal but statistically significant positive impact on
voluntary tax compliance. This probably can be explained by the strong religious values held by many
Malaysians, as well as the concept of giving which has been emphasised in almost all religions.
Research limitations/implications – Because this study did not differentiate between religious
values and moral values in measuring the source of respondents’ internal values, there was a possibility
that their internal values may be derived from both sources. Hence, comparing the impact of
individuals’ religious values with individuals’ moral values that have no influence from religion on tax
compliance is suggested for future research.
Practical implications – A new mechanism is suggested to the Malaysian tax authority in regards
to the treatment of religious payment to reduce the sense of inequality among citizens and taxpayers.
Originality/value – This study enriches the limited literature of tax compliance from the perspective
of developing countries, particularly Malaysia, and adds to the limited literature internationally from a
religiosity perspective.
Keywords Religiosity, Zakat, Tax compliance, Mixed-methods study, Moral value, Voluntary tax
compliance
Paper type Research paper

Accounting Research Journal

An earlier version of this paper was presented at the 25th Australian Tax Teachers Association Vol. 27 No. 1, 2014
(ATTA) Conference from 23 to 25 January 2013 in Auckland, New Zealand. The authors would pp. 71-91
© Emerald Group Publishing Limited
like to thank the conference participants for their helpful comments. The authors also would like 1030-9616
to thank the reviewers for their constructive comments. DOI 10.1108/ARJ-08-2013-0061
 ARJ 1. Introduction
The issue of tax compliance is considered as one of the main concerns for most governments
27,1 in this world and has been the focus of many researchers in this area. The weight of the
earlier research has been based on economic deterrence models using the economic factors in
the tax structure, such as tax audits and penalties, to deter tax evasion. However, this focus
has faced various criticisms, particularly from researchers and tax administrators who
72 believe in the need to explore both economic and non-economic factors to fully understand
taxpayers’ compliance attitudes. The veracity of the non-economic approach has been
strongly supported by tax scholars since the 1990s who contend that the challenge of tax
compliance is not to explain why people evade, but rather why people willingly pay taxes.
This is because most people never miss paying their taxes, even though the chances of being
audited are low or the penalties for evasion are small. For example, from ⬎ 5.2 million
registered non-company taxpayers, including individual taxpayers, ⬎ 1.6 million tax audit
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cases (approximately 30 per cent) were resolved in Malaysia in 2010 (Inland Revenue Board
of Malaysia, 2011)[1]. Even though the rate of tax auditing was considered reasonable (based
on the percentage of tax audit cases resolved as stated earlier), the total amount collected
from these audits (which included taxes and penalties) was a relatively small figure of
approximately RM1.8 million (approximately A$556,500). This might indicate that
Malaysians’ tax attitudes are not fully influenced by the threat of punishment such as tax
penalties used by the tax authority in this situation, but most probably by other factors that
are more influential in encouraging their willingness to voluntarily comply with tax laws.
The more recent research in tax compliance emphasises the importance of exploring the
impact of non-economic factors on tax compliance from a number of perspectives such as the
internal values that come from an individual his/herself which mainly derive from his/her
family values, culture and religion. One of the non-economic factors which has been
neglected by most research and should be further examined is religiosity. The religious
values held by most individuals are generally expected to effectively prevent negative
attitudes and encourage positive attitudes in an individual’s daily life, and hence, religiosity
is presumed to positively motivate taxpayers to voluntarily comply with tax laws. In other
words, religiosity might provide a possible explanation for the observation of most
taxpayers’ strong positive compliance attitudes as apparent in the prior literature overall.
Therefore, this paper examines the impact of individuals’ religiosity based on intrapersonal
and interpersonal religiosity commitments in shaping taxpayers’ compliance attitudes. The
remainder of the paper is organised as follows. The next sections briefly review the
theoretical concepts of tax compliance and literature regarding the influence of religiosity in
tax compliance studies. This discussion is then followed by the presentation of the methods
used in this study, namely, mixed-mode surveys and face-to-face interviews. Next, the
findings of the study from both methods are presented. The subsequent section provides a
discussion of the overall findings, together with some theoretical and policy implications
drawn from the empirical results. Several limitations of the current study are acknowledged,
and the final section concludes the paper.

2. Theoretical concepts
Generally, the economic deterrence approach was considered to be the main way to deter
tax evasion (Allingham and Sandmo, 1972; Fischer et al., 1992). In this approach,
penalties and the prospect of audits are seen as effective tools in threatening people not
to avoid taxes as evident in a number of studies (Beck et al., 1991; Becker et al., 1987).
 Underlying this approach is the assumption that higher penalty and audit probability Religiosity on
are associated with less tax evasion. Conversely, other studies pointed in the opposite
direction. For example, there was no significant impact of the incremental criminal
taxpayers’
penalty on tax compliance, and tax audits had an insignificant impact on salaried compliance
taxpayers (Witte and Woodbury, 1985). This is probably because the threat of attitudes
punishment through tax penalty and tax audit used by the tax authority may be only
effective for certain group of taxpayers. Therefore, heavy reliance on the economic 73
deterrence approach to explain tax compliance problems may not be appropriate.
It has also been argued that the real challenge of the tax compliance problem is not to
explain why people evade paying taxes, but rather why people comply, given that the
actual rate of tax audits and penalties imposed on taxpayers is quite low as compared to
the percentage of people who comply (Alm et al., 1995). For this reason, the focus on the
economic deterrence approach has shifted to the social psychological approach to
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consider the non-economic factors and, hence, gain a better understanding of taxpayers’
complicated behaviours. The social psychological theorists believe that non-economic
factors are the main factors influencing taxpayers in making their compliance decisions
and not the economic factors as in the economic deterrence approach. Most of the studies
of this approach focused on the elements that affected the process of taxpayers’
decision-making such as peer influences and individual personal attitudes (Hite, 1988;
Kaplan and Reckers, 1985; Song and Yarbrough, 1978).
However, the use of each approach alone did not appear to adequately explain
taxpayers’ compliance behaviours. The fiscal psychological approach (Schmölders,
1959; Hasseldine and Bebbington, 1991) was suggested to provide a better picture by
combining the prior two approaches[2]. This approach does not only focus on taxpayers’
own behaviours and peer influences (Groenland and Veldhoven, 1983; Smith and
Kinsey, 1987) but also on the impact of government action and the effect of the tax
authority’s treatment on taxpayers’ behaviour (McKerchar and Evans, 2009). One of the
elements that has been emphasised in this approach is personal moral values that shape
taxpayers’ behaviours, and many terms were used to represent these values in prior
research such as:
• ethics (Song and Yarbrough, 1978);
• civic duty (Slemrod, 1998);
• moral obligation (Bobek and Hatfield, 2003);
• willingness to obey (Torgler et al., 2008); and
• religiosity (Torgler, 2006).

Despite these attempts from a wide variety of disciplines, the grounds for
non-compliance or compliance behaviours of taxpayers are still inconclusive due to the
limitations of each model. Hitherto, it remains crucial to pull together all this information
to develop better approaches to offer appropriate solutions to these ongoing issues.

3. Religiosity and tax compliance

Religion is broadly defined in the Oxford Dictionary (2012) as a belief in a superhuman
controlling power, especially in a personal god or gods entitled to obedience and
worship, and religiosity is a state of being obtrusively religious. Allport and Ross (1967)
defined the term religiosity based on two religious orientations, extrinsic and intrinsic.
 ARJ People’s extrinsic religious orientation can easily be captured based on their behaviour
such as the frequency of worship attendance compared to their intrinsic religious
27,1 orientation (Kurpis et al., 2008) that motivates people to internalise and live with the
religious values in their lives. In prior research, religiosity was explored mainly based on
two perspectives, namely, religious affiliation and religious commitment (Pope and
Mohdali, 2010). Religious affiliation refers to the particular religious group adhered to
74 by individuals such as Buddhism, Christianity, Islam and Hinduism. Religious
commitment is defined as “the degree to which a person adheres to his/her religious
values, beliefs and practices, and uses them in daily living” (Worthington et al., 2003,
p. 85). Religious commitment is divided into two types:
(1) intrapersonal religious commitment that originates from the beliefs and
attitudes of an individual; and
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(2) interpersonal religious commitment that derives from the involvement of an

individual with a religious community or organisation.

However, both orientations are crucial to define one’s religious level because according
to Allport (1961), the extrinsic religious orientation can be used to define the actual
intrinsic religious orientation of an individual which inspires the inclination of his/her
reaction towards positive behaviour and disinclination towards negative behaviour.
Some evidence in the prior research suggests that religiosity plays an important role in
developing positive moral values because all religions promote moral teaching (Kurpis
et al., 2008). Therefore, it is possible that religiosity might be an effective deterrent
against illegal behaviour as evident in a number of studies that relate to crime and
delinquency (for example, Stark et al., 1982; Johnson et al., 2001).
Surprisingly, there has been little research examining the role of religiosity in a tax
compliance or tax evasion context (Pope and Mohdali, 2010). According to Mohdali and
Pope (2012), the significant impact of religiosity in tax compliance research was only
strongly emphasised in recent studies. A study by Tittle and Welch (1983) was one of the
first studies to explore the function of religiosity in inhibiting deviant acts which
included tax evasion. It was found that religiosity had a stronger influence in a
community with a larger proportion of non-religious people in encouraging people to
obey the rules. In another study, the findings based on data collected from Catholic
parishioners indicated that the level of religiosity was evident to “promote a moral
climate” in deterring tax evasion for both individual and community religiosities (Welch
et al., 1991, pp. 166-167). By using the same data of Catholic parishioners, Petee et al.
(1994) confirmed that informal sanction threat based on the level of social integration in
the parish had a significant impact in inhibiting tax evasion. The findings appeared to
be similar probably because the same source of data was used in both studies. Grasmick
et al. (1991) measured religiosity based on two dimensions, namely, religious identity
salience and church attendance, and they found that religiosity was effective as a
sanction in deterring tax evasion. Further, religious affiliation was also used to measure
an individual’s religiosity, and the findings revealed that the fundamentalists were less
inclined to cheat in tax compared to those with no religious affiliation (Grasmick et al.,
1991). Overall, almost all of the earlier studies that explored the impact of religiosity
focused on the negative attitudes of taxpayers, namely, tax evasion or tax cheating.
The importance of religiosity in the recent tax compliance research was explored
from the different perspective of taxpayers’ attitudes, namely, tax compliance or tax
 morale. This is in line with the recommendation for future research made by Religiosity on
Riahi-Belkaoui (2004) to explore religiosity to fully understand the tax compliance
problem. An extensive research of religiosity in tax morale has been commenced by
taxpayers’
Torgler, and data from the omnibus survey such as the World Values Survey (WVS) and compliance
European Values Study (EVS) were mainly used in his studies (Pope and Mohdali, 2010). attitudes
Torgler covered a number of countries in his studies such as Canada (Torgler, 2003),
Germany (Feld and Torgler, 2007), Asian countries (Torgler, 2004), most of the 75
European countries (Torgler and Schneider, 2007), Turkey (Torgler et al., 2008), the USA
(Torgler, 2012) and covered ⬎ 30 other countries (Torgler, 2006). Overall, the findings of
these studies indicated that religiosity had a positive impact on taxpayers’ morale.
Findings by Stack and Kposowa (2006) reinforced the conclusion that the tendency to
accept tax fraud was clearly evident among people with no religion. In an other study, a
similar finding was confirmed based on data gathered from 47 countries that focused on
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tax evasion as a dependant variable (Richardson, 2008). There was a negative

relationship between an individual’s level of religiosity and tax evasion.
Even though the majority of studies in this area pointed to a positive impact of
religiosity on tax compliance or tax evasion, there were two studies that rejected the
same notion. In the first study, religiosity appeared to be ineffective to deter taxpayers’
perceptions on tax cheating issues regardless of their religiosity levels (Welch et al.,
2005). This is probably because, as strongly emphasised in Christianity (McGee, 2012) or
even in Islam (Jalili, 2012), tax evasion can either be perceived as ethical or unethical,
depending on the way a country is administered and whether the government strictly or
only partly follows the religion’s laws. In the second study, no empirical evidence
supported religiosity as one of the factors that influenced tax morale in the USA in a
regression study of Internal Revenue service’s taxpayer data (McKerchar et al., 2013). It
is argued that the personal integrity of individuals may have a stronger effect on their
tax compliance attitudes compared to their own religious beliefs. Despite some mixed
findings, the importance of religiosity is apparent in the prior literature to strongly
motivate taxpayers to comply with tax laws. However, the term “religiosity” in this
paper does not refer to any specific beliefs or affiliations. It only involves the level of
religiosity[3] in individuals in general.

4. A mixed-methods study
With a heavy reliance on cross-cultural surveys such as the WVS in the earlier research
that examined religiosity as one of the variables in influencing taxpayers’ compliance
attitudes, as discussed by Pope and Mohdali (2010), exploring other methods may
provide different perspectives in understanding taxpayers’ complex attitudes. Morgan
(2007) encouraged all researchers to share their beliefs through a mixed-methods
approach in strengthening the methodological issues, as well as to create a sense of
excitement in terms of research direction. This is because the strengths from one method
can be used to counterbalance the others’ weaknesses, particularly in interdisciplinary
research such as taxation (McKerchar, 2008). For example, quantitative data are argued
to yield a weak contextual understanding of participants, but its findings can be
generalised to a larger population. On the other hand, the voices of participants in
qualitative data are directly heard, but, due to the limited number of participants,
generalisation to a larger population is impossible.
 ARJ After careful reflection, adopting a sequential explanatory design was considered
appropriate to derive initial quantitative results from a survey with subsequent
27,1 qualitative data to be obtained from face-to-face interviews (Creswell and Plano Clark,
2011). Quantitative data from a survey allow a researcher to test the trends of the
theoretical framework built on the previous literature such as relationships and causal
effects between variables (McKerchar, 2010). This is because comparing groups and
76 relationships between variables is the central idea of quantitative research (Punch,
2005). Consequently, qualitative data from face-to-face interviews offer rich information
to help researchers to investigate the complexities of the subject matter and provide an
opportunity to further explain the reasons behind the survey findings (McKerchar,
2010). This may help to increase the reliability and validity of work in this field and
provide additional perspectives to view taxpayers’ complex behaviour.
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4.1 Survey
Due to the involvement of sensitive topics, namely, tax compliance and religious issues
in this study, a self-administered survey was considered to be the best method because
people are more likely to complete and provide responses anonymously (Bourque and
Fielder, 1995; Lee, 1993). However, self-administered surveys are commonly associated
with low response rates in comparison to interview surveys (de Vaus, 2002). Improving
survey response rates requires a better strategy by using multiple methods. For
example, the use of a mail survey and telephone interviews in the American Community
Survey increased the response rate effectively with a low overall cost (de Leeuw et al.,
2008). Hence, the mixed-mode surveys were particularly chosen in this study to avoid
low response rates (de Leeuw et al., 2008), as clearly evident in most of prior Malaysia tax
surveys (Abdul-Jabbar and Pope, 2008; Palil and Mustapha, 2011).
This study used a self-administered questionnaire distributed by the selected
company intermediaries via a drop-off survey and online survey to salaried individuals
working at seven public and ten private companies in Kuala Lumpur and Putrajaya,
Malaysia, respectively. The mode effects are to be anticipated in mixed-mode surveys,
but the effect is considered insignificant (de Leeuw, 2008). A sample size of between 150
and 200 is considered sufficient to describe a large population because an additional
sample size will only provide a modest impact (Fowler, 1993). The respondents were
selected based on proportionate stratified sampling particularly for salaried taxpayers.
This was based on the ratio of ethnic group members in Malaysia according to the 2000
Census, namely, Malays and other indigenous groups (66 per cent), Chinese (25 per cent),
Indians (8 per cent) and others (1 per cent) (Department of Statistics Malaysia, 2001)[4].
This is considered acceptable because there is a common link between ethnicity and
religion in Malaysia (Lee, 2000). This is evident in Article 160 of the Constitution of
Malaysia that a “Malay” is a person who adheres to Islam, normally speaks the Malay
language and adopts Malay customs. Likewise, 89.9 per cent Chinese are Buddhists, 87.9
per cent Indians are Hindus and a minority of Chinese (7 per cent) and Hindus (3 per cent)
adhere to Christianity (Department of Statistics Malaysia, 2011). Thus, the three
majority ethnic groups were selected in this study to represent the four major religions
in Malaysia, namely, Buddhism, Christianity, Hinduism and Islam in the Malaysian
population.
To ensure all types of individual taxpayers were included in this study,
self-employed taxpayers were selected based on a convenience sampling method
 because according to Sood and Nasu (1995), people are quite reluctant to participate in Religiosity on
research relating to religious issues; hence, convenience sampling was considered
appropriate to ensure better responses. Therefore, a total of 500 questionnaires were
taxpayers’
distributed to individual taxpayers by using the drop-off survey method, and the survey compliance
link was forwarded for the online survey. A comparison between the total responses attitudes
from both surveys with the Malaysian population indicates comparable percentages for
all three ethnic groups, as illustrated in Table I. Even though the samples are not a 77
perfect representation of the population of Malaysia, the percentage of ranking by ethnic
group is similar to the true proportion, and hence, the final sample is considered
acceptable.
With the aim of measuring individuals’ attitudes towards tax compliance as well as
to measure the religiosity scores of individuals, two constructs were developed based on
the compilation of multiple items from the literature review. In the survey, respondents
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were required to indicate their compliance attitudes which was represented by

voluntary tax compliance on a 5-point Likert scale (1 ⫽ strongly disagree, 5 ⫽ strongly
agree), adapted from Kirchler and Wahl (2010) and Braithwaite et al. (2007). The
independent variable religiosity was measured based on ten religiosity items on a
5-point Likert scale (1 ⫽ not at all true of me, 5 ⫽ totally true of me), adapted from
Worthington et al. (2003). An individual with a score of 38 or higher out of a total score
of 50 (30 from intrapersonal and 20 from interpersonal religiosity items) is considered to
be highly religious (Worthington et al., 2003).

4.2 Face-to-face interview

To best understand the conflicting issues of taxation and religiosity faced by individual
taxpayers in Malaysia, the first-named researcher chose Malaysian individual
taxpayers who had a minimum of three years’ experience as a taxpayer and who
adhered to different religions to participate in this study. They were deemed to have
sufficient experience to share with the researcher in providing critical opinions and
comments regarding the Malaysian tax system. The same company intermediaries who
were involved in the previous surveys were contacted to obtain a list of potential
participants who were willing to be interviewed. Based on the list, the interview
participants were selected based on their ethnicity to ensure all views from different
religions were heard and gathered to explain the issues arising from the survey. This
type of sampling is known as “purposive sampling” (Punch, 2005). This describes the
intentional selection of participants as a central phenomenon to be explored in the study.

Responses from Responses from

drop-off survey online survey Total responses Malaysia’s population
Ethnicity (%) (%) (%) (%)

Malays and other

indigenous groups 49.0 29.1 78.1 66.7 Table I.
Chinese 13.1 2.7 15.8 25.3 Comparison of
Indians 2.7 3.4 6.1 8.0 respondentsa from total
Total 64.8 35.2 100.0 100.0b responses with Malaysia’s
population by ethnic
Notes: a n ⫽ 302; b
The total is based on only three ethnic groups groups
 ARJ Of the 20 participants approached, only 15 agreed to be involved in these interviews.
The interviews were conducted in either English or Malay, depending on the
27,1 participant’s preference. These questions were designed after the survey findings
were finalised to identify the issues that needed to be further explained and clarified.
The interviews were successfully conducted with only 14 participants because one
participant cancelled the appointment at the last minute. Hence, no replacement was
78 made.

5. Findings
5.1 Survey
The drop-off survey including questionnaires distributed to self-employed individuals
yielded 197 usable responses, a 40 per cent response rate after considering the
out-of-frame replies[5]. The online survey generated 121 responses, and of those, only
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105 were usable. The total usable responses from these two methods was therefore 302.
The responses from these two methods were combined because the same questionnaire
was used in both methods and higher responses from the survey were expected to
accurately represent the sampled population (Kanuk and Berenson, 1975). The t-tests
showed there were no significant differences in any of the data derived from the two
methods, for example (t(300)VTC ⫽ 0.91, p ⫽ n.s.) and (t(300)ETC ⫽ 0.08, p ⫽ n.s.).
In terms of the profile of the respondents, Malay and other indigenous groups were
the largest proportion of the total respondents (78.1 per cent), followed by Chinese (15.9
per cent) and Indians (6.0 per cent). Based on these ethnic groups, all Malays were
Muslims (77.8 per cent) except for one of the respondents from an indigenous group who
adhered to Christianity (0.3 per cent). The Chinese and Indians respondents were
predominantly Buddhists and Hindus with 10.6 and 4 per cent, respectively. The
minority of these two ethnic groups were Christians and Muslims. The ethnicity and
religion of the respondents were considered roughly in proportion to the size of
Malaysia’s population in 2010 (Department of Statistics Malaysia, 2011), although the
Malay Muslim respondents appeared to be over-represented. The details of the ethnic
groups and their religious adherence are shown in Table II.

Ethnicity
Malays and other
indigenous groups Chinese Indians
Malaysia’s Malaysia’s Malaysia’s
population Current study population Current study population Current study
Religion (%) (%) (%) (%) (%) (%)

Buddhism 0.1 0.0 21.1 10.6 0.1 0.0

Christianity 6.1 0.3 2.8 3.7 0.5 1.7
Hinduism 0.0 0.0 0.1 0.0 6.5 4.0
Table II. Islam 61.5 77.8 0.2 1.3 0.3 0.3
Comparison of ethnicity No religion 0.5 0.0 0.2 0.3 0.0 0.0
and religion of Total 68.2 78.1 24.4 15.9 7.4 6.0
respondentsa with
Malaysia’s population Note: a n ⫽ 302
(2010) Source: Department of Statistics Malaysia (2011)
 The overall mean score for voluntary tax compliance is 3.67, which demonstrates high Religiosity on
voluntary tax compliance among the respondents. A one-way ANOVA test was used to
compare the means of voluntary tax compliance according to the demographic details of
taxpayers’
the respondents. The findings revealed that there was no significant difference between compliance
ethnic groups and religions in terms of their voluntary tax compliance attitudes. The attitudes
average score of intrapersonal religiosity for each respondent was 23.61[6]. This was
apparent from their attitudes towards the intrapersonal religiosity items such as 79
religion which was acknowledged as important in their lives (90 per cent), and religious
beliefs were accepted by almost 80 per cent of the respondents as a significant influence
in their daily lives. Respondents indicated an average score of 14.16[7] regarding their
views of interpersonal religiosity. This can be clearly seen from their attitudes towards
the financial contributions made to their religious organisation and enjoyable time spent
with their friends from the same affiliation (76 per cent).
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Respondents were divided into two different groups depending on their levels of
religiosity. This was based on a total score of religiosity for each of the respondents,
which was obtained by summing scores for the ten religiosity statements. A low level of
religiosity was in a range of 0-37 and a high level of religiosity was between 38 and 50
(Worthington et al., 2003). A mean score for less religious respondents was 33.53 with a
median of 34.00 and standard deviation of 3.17. On the other hand, highly religious
respondents scored a mean of 41.28 with a median of 41.00 and standard deviation of
2.70. A descriptive analysis was performed to understand the background of highly and
less religious respondents, as shown in Table III.
Religiosity (␤ ⫽ 0.19, p ⬍ 0.01) was found to be a significant predictor of voluntary
tax compliance, and the overall model was produced at adjusted R[2] ⫽ 0.03, F (1, 300) ⫽
10.93 and p ⬍ 0.01. The overall single regression analyses suggested that religiosity
may only explain 3 per cent of taxpayers’ voluntary compliance attitudes. Multiple
regression analyses were also performed to examine the influence of religiosity
commitments on voluntary tax compliance. The multiple regressions produced an
adjusted R2 ⫽ 0.04, F (2, 299) ⫽ 7.76 and p ⬍ 0.01. Intrapersonal religiosity had a
positive significant impact, indicating that the stronger the individuals’ intrapersonal

Low-level High-level
religiosity religiosity Total
Detail Category n (%) n (%) (%)

Ethnicity(n ⫽ 302) Chinese 41 13.6 7 2.3 15.9

Indian 9 3.0 9 3.0 6.0
Malay and other indigenous groups 87 28.8 149 49.3 78.1
Religion(n ⫽ 302) Buddhism 30 9.9 2 0.6 10.5
Christianity 9 3.0 8 2.7 5.7
Hinduism 8 2.7 4 1.2 3.9
Islam 89 29.5 151 50.0 79.5
No religion 1 0.3 – – 0.3
Totala 137 45.4 165 54.6 100.0
Table III.
Notes: a The maximum total of respondents was 302 and the total of respondents varied for each Respondents’ profile
category due to some missing values; Some of the percentages do not total up to one hundred per cent according to levels of
due to rounding religiosity
 ARJ religiosity, the more they were inclined to comply with tax laws. The interpersonal
religiosity had a negative effect on voluntary tax compliance and was an insignificant
27,1 contributor.

5.2 Face-to-face interview

The interviews were conducted to explore the possible explanations of the findings
80 gathered in the survey on the impact of religiosity on tax compliance and achieve a much
better understanding of the perceptions of taxpayers towards tax compliance. The
verbatim quotations are used in this study because they reveal the genuine meaning of
the participants’ feelings, thoughts, experiences and basic perceptions (Neale et al.,
2005). Thus there was no correction made to the verbatim quotations despite the English
language being used incorrectly by some of the participants. The ethnicity and
designation were used as identification for each of the participants to differentiate their
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diverse backgrounds because ethnicity can be associated with religion, while

designation can be associated with their social status. Based on these, their perceptions
can be linked easily with their background to try to understand their stance on certain
issues. Even though 14 participants were involved in the interviews, only relevant views
are selected and discussed in this paper.
The participants represented three major ethnic groups, namely, Malay and other
indigenous groups, Chinese and Indian. All the Malay participants were Muslim except
for two participants from the indigenous groups who adhered to Christianity. A
majority of the Chinese were Buddhist and the Indian participants were Hindu except
for one Chinese and Indian, both of whom were Christian. Almost all participants
considered that religiosity had only a minor impact on taxpayers’ compliance attitudes,
and some of them, particularly the Buddhists, totally rejected the possibility that
taxpayers’ attitudes can be influenced by religiosity. The duty as a citizen to the country
and social contribution to the community were suggested by some of the participants to
be the main factors in influencing them to comply with tax laws. In addition, taxpayers’
perceptions of government, employment status, law and enforcement were also
emphasised as being more influential in influencing taxpayers’ attitudes compared to
religiosity. As for the Muslim participants, they considered their main priority to be the
payment of “zakat”[8], not the government tax. The selected examples[9] are presented
in Table IV.
Nevertheless, religiosity was also perceived to be effective in influencing people to
comply with tax laws by a minority of the participants from the positive religious values
instilled in each individual to contribute to the well-being of the nation. All religions
teach their followers to help others by contributing or donating such as “zakat” in Islam
and tithe in Christianity. The concept of giving was stressed to be another reason for
them to comply with tax laws because they believed that blessing or financial prosperity
to be a result of giving. These values are expected to motivate taxpayers to perform their
duties not only to their religion but also to the country.
Even though many participants considered that religiosity had only a minimal
impact on tax compliance attitudes, most of them agreed that the minimal impact may
be derived from a number of ways. First, a majority of the participants observed that the
most dominant value shaped by religion in most individuals was being a responsible
citizen to perform his/her duty or obligation to the country. Second, it was the sense of
helping the country in terms of having better development as well as helping the needy
 Reason
Duty as a citizen
Social contribution
Perception of government
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Statement
Religiosity on
taxpayers’
“Not really. Some people may pay taxes because of their duty as a
citizen, but paying taxes due to their religious awareness is quite compliance
unusual, I think.” (P13, Malay, Tutor) attitudes
“Actually, if you ask me from a Buddhist point of view, it is not
much! People comply only because of the social cause not
religious influence.” (P4, Chinese, Senior Manager)
81
“Actually, I don’t think religion do influence. The government
might be the main influence that I pay taxes as a good citizen. I
think it is the government that makes us, whether we want to pay
or not. If we are paying and we saw nothing can help us and they
don’t do anything that contribute which can help our lives to be
better, that’s why people are avoiding or delaying this tax thing.”

(P11, Chinese, Executive Officer)

Employment status
Zakat
Law and enforcement
“It depends on our status of employment, not really on religion.”
(P8, Kadazan, Executive Officer)
“There are many people who pay “zakat”, but they don’t bother to
pay tax. People who understand what “zakat” really is and the
reward that they get hereafter, may be they are fighting for that
chance more than complying with tax laws. Because few people
that I know they are more committed to paying “zakat” than tax.”
(P1, Malay, Lecturer) Table IV.
“Religious values are not the main factor. There are other factors The main influence to
such as enforcement.” (P9, Iban, Senior Executive Officer) pay tax

and poor by contributing to the government. Finally, religious values were expected to
shape people to be a holistically fair individual. The minimal impact of religiosity on
taxpayers’ attitudes was also considered by most of the participants to be very
positively driven by intrapersonal religiosity which is rooted in most individuals and
less likely to be influenced by interpersonal religiosity except for atheists who deny or
disbelieve the existence of God. Many of them, Muslims and Christians in particular, and
one of the Hindu participants believed that the inner religious values derived from their
religious practices and strong faith created the genuine desire to perform their duties to
the country and contribute in helping others without any force from the external
environment such as laws and penalties. Some argued that the foundation of faith from
religion was reflected in people’s beliefs and principles and it was then translated into
their actions. In other words, the positive internal values in people may push their decent
intention and willingness in making their own decisions to pay taxes.
The impact of “zakat” on taxpayers’ attitudes specifically from Muslims’
perspectives was also sought[10]. “Zakat” was viewed to encourage Muslims to pay
taxes to the government in two ways. First, the practice of giving in religion or
“sadaqah” was considered by some of the participants to motivate the same feeling of
giving towards the country to gain “barakah” or blessings from Allah Subhanahu
Wata’ala[11] (SWT). A similar view was said to be also shared in Christianity such as
tithing. This contribution is considered as their support for the development of the
country besides helping others. Second, some of the Muslim participants considered that
paying “zakat” is a good move to reduce their tax dues, as “zakat” is treated as a
 ARJ deduction or rebate which can be deducted from their net tax payable. Hence, they were
willing to pay taxes voluntarily so that their compulsory “zakat” payment can be fully
27,1 utilised in reducing their actual tax payments. However, the treatment of “zakat” as a
rebate which is only applicable to Muslims was raised as one of the signs of
discrimination between ethnic groups. Table V presents the relevant quotations.

82 6. Discussion of findings
The impact of religiosity on voluntary tax compliance in the survey from this study
appears to be minimal even though significant. The findings from the interviews also
pointed in the same direction. Religiosity was viewed by most of the participants[12] as
having little impact on tax compliance. Taxpayers’ strong civic duties and high
responsibilities to contribute to other people are emphasised as being the main reasons
for people paying taxes. The minimal impact of religiosity on voluntary tax compliance
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may be because only intrapersonal religiosity was found to impact on voluntary tax
compliance in the multiple regression analyses. Nearly all of the participants
acknowledged that the minimal impact of religiosity on tax compliance was firmly
determined by the internal values in each individual. The reflection of taxpayers’
religious beliefs and faiths was expected to be translated into their actions; hence, the
inner values in taxpayers derived from religious beliefs and faith had nurtured a sense
of carrying out civic duties to the country, as well as contributing to help others. Overall,
although voluntary tax compliance is influenced significantly by religiosity which is in

Theme Sub-theme Example of quotation

Positive Use the same concept of “Some people know that if they don’t comply with “zakat”
“Zakat” to the then the salary they get, will not be given “barakah” by
Government Tax Allah SWT. For me, when you understand the reward
that you get may be it is not very apparent right now in
this world, but may be in the hereafter. You just hold on
to this belief.” (P1, Malay, Lecturer)
“By paying “zakat” may be make some people realised
that they need to help others. So, it might also apply to
the concept of tax to help the country’s development.”
(P7, Malay, Executive Officer)
Rebate “When they pay “zakat”, automatically they will pay tax,
because “zakat” is considered $1 to $1 to tax.” (P2, Malay,
General Manager)
“Paying “zakat” means you are half way paying taxes. In
other words, “zakat” can reduce the amount of tax that
you have to pay. This is because “zakat” is treated as a
deduction [rebate].” (P7, Malay, Executive Officer)
Negative Unequal “The equality is not there. We gave a lot, but it was never
coming back to all of us, it only come back to some
people. Opportunity was only given to certain group of
people. For example, no offence ok, even though I pay to
Table V. church, it is not considered as rebate but unlike “zakat”.
The impact of “Zakat” on That’s why people are asking, why should I pay tax?”
tax compliance (P5, Indian, Self-employed)
 line with most of the prior studies that used tax morale as the dependent variable Religiosity on
(Torgler, 2003, 2006; Torgler, 2007; Torgler and Schneider, 2007; Torgler et al., 2008;
Torgler, 2012), the impact is minimal.
taxpayers’
Other explanations offered for this trend include the concept of giving such as compliance
“zakat” for Muslims and tithing for Christians which was strongly practised by ⬎ 70 attitudes
per cent of the respondents[13] and highly supported by the participants. Their
practise of giving either to their religious organisations or to the poor and needy was 83
expected to improve their willingness to pay taxes. For example, the Muslim
participants viewed the sense of paying “zakat” as strongly driving the same sense
of paying tax to the government from the concept of “sadaqah” and “barakah”.
“Sadaqah” means giving something voluntarily to somebody without asking for
something in return, only with the intention to please Allah SWT so that “barakah”
or blessing from Allah SWT will be received. “Barakah” is commonly understood by
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Muslims as being able to achieve more with few resources, doing much in little time
and generating a lot with little effort with the blessings of Allah SWT. Hence, tax
paying was considered as “sadaqah” in helping others to get “barakah” from Allah
SWT. A similar view is shared in other religions. One of the Christian participants
stressed that the practice of giving is important to ensure continuous blessings from
God. Further, one of the Hindu participants believed that contributing to the country
and people is one of the ways to earn a sense of being clean before God. However,
there is no clear relationship between the concept of giving and blessing from God
from the Buddhism perspective. This is probably because Buddhism is argued as
going beyond a religion and is more about a philosophy or a way of life. This is in
line with the statement made by one of the participants that social benefit is the main
reason for complying.
It is an obligation for the Muslim to pay not only income tax to the government
but also “zakat” to the religious authority under any written law, which is “Lembaga
Zakat”. “Zakat” is an obligation for the Muslim and not an option as stated in the five
pillars of Islam. Hence, it is clear that as a Muslim, he/she needs to pay two different
taxes every year from the same source of income. Therefore, the Malaysian
Government has made a tax policy in the Income Tax Act 1967, Section 6A (3)[14] to
treat “zakat” as a tax rebate to avoid the same income to be taxed twice. Because
zakat is treated as a tax rebate, probably almost all Muslim taxpayers in Malaysia
view “zakat” as one of the reasonable ways to lessen their actual tax payment to the
government or to claim for a tax refund for those who are entitled. The findings from
the interviews support the same notion. For that reason, they are more willing to
abide by tax laws voluntarily. These results are consistent with the finding of a
previous study that a tax rebate positively increased taxpayers’ attitudes towards
the tax system (Hasseldine and Hite, 2003).

6.1 Theoretical implications

This study makes a number of contributions to the existing literature. This study
enriches the limited literature of tax compliance from the perspective of developing
countries, particularly Malaysia. This is because empirical and institutional research in
taxation outside the USA, especially in developing countries, has been strongly
encouraged to stimulate comparative analysis across countries (Andreoni et al., 1998).
Most of the prior studies have been carried out in developed countries such as the USA,
 ARJ Europe and Australia except for a few studies, most of which used omnibus surveys
such as the WVS which covered a number of countries including developing countries
27,1 (Torgler, 2004, 2006). Further, this Malaysian study adds to the limited literature
internationally from a religiosity perspective.
Despite its minimal impact on voluntary tax compliance, this study provides an
indicator to further explore taxpayers’ complex attitudes from a tax compliance
84 perspective, particularly when the majority of taxpayers are viewed as having a high
intention to willingly comply with tax laws (Kirchler et al., 2008). This study has
probably moved the existing literature even further by identifying the actual religiosity
commitment that has a major impact on taxpayers’ compliance attitudes. This is
because religiosity was treated in most of the prior research as a single variable except
for some studies such as that by Grasmick et al. (1991). Thus, the current study provides
further evidence that the minimal impact of religiosity on tax compliance mainly derives
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from taxpayers’ intrapersonal religiosity.

The mixed-methods approach carried out in this study provides better evidence from
different perspectives to overcome the limitation of a single design. This approach is
consistent with the growing trend to incorporate a combination of quantitative and
qualitative research methods in a study (McKerchar, 2002; Saad, 2011) even though the
question of balance between both methods is arguable in this method. Ultimately, the
weighting of each method probably depends on how the research questions need to be
addressed together with the chosen research paradigm because no method is superior to
the other.

6.2 Policy implications

Based on the responses from this study, there are a number of issues that can be
addressed by the Inland Revenue Board of Malaysia (IRBM) in particular and
government in general to realise its mission to increase the quality and integrity of
taxation services it offers together with the promotion of voluntary tax compliance
among Malaysians (Inland Revenue Board of Malaysia, 2011). First, “zakat” was viewed
by most of the Muslim participants as one of the influential factors to encourage them to
voluntarily pay taxes to the government. This is because “zakat” can reduce the amount
of tax due to the government, as it is treated as a rebate. However, one of the non-Muslim
participants argued that other religious payments are not given the same treatment by
the IRBM. This is because, as stated earlier, Muslims are obliged to pay two obligatory
taxes on the same source of income in a year. To reduce their burden, the treatment of
“zakat” as a rebate is stated in the Income Tax Act 1967 so that no extra payment will
be imposed on Muslims who paid “zakat”.
For the non-Muslims, their religious payments are not considered as rebates because
these payments are not regarded as obligatory but as voluntary payments. The
payment is treated as an approved donation which is subject to the 7 per cent restriction
on the aggregate income as clearly stated in Section 34B, Income Tax Act 1967. To
reduce the perception of inequality as raised in the interviews, it is suggested that the
IRBM should educate taxpayers by clearly explaining to them the difference between
the treatment of obligatory and voluntary religious payments in the calculation of
income tax. However, introducing a new mechanism to treat all religious payments
equally is probably the best way to reduce the sense of inequality that can generate
tension and conflict among citizens and taxpayers.
 Second, the IRBM’s mission can probably be achieved based on the findings drawn Religiosity on
from the current study regarding the impact of religiosity on tax compliance. Even
though the impact of religiosity was found to be statistically significant but less likely to
taxpayers’
highly influence the Malaysians’ compliance attitudes, religious values appear to be one compliance
of the key influences to strongly motivate people to be responsible individuals and less attitudes
self-centred by helping other people. These values probably can be applied to their
attitudes towards taxation to be highly compliant, in order to be a good citizen and to 85
help the government in developing the country for the benefit of all. Hence, achieving
high voluntary tax compliance is a realistic mission for the IRBM because almost all of
the Malaysians adhered to a particular religion, only less than one per cent have no
religion (Department of Statistics Malaysia, 2011).

6.3 Limitations
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Despite the significant contributions of this study, several key limitations of the present
study should be noted. The first major limitation of this study is in regard to the
assumed source of internal values of an individual. In this study, internal values were
deemed to be completely derived from religion because almost all of the respondents in
this study adhered to a religion. However, it can be argued that the source of morality of
an individual in guiding him/her to determine what is morally right or wrong can come
from religion or from principles or beliefs of an individual which are unrelated to
religion. This was accentuated by Hemingway and Maclagan (2004). Hence, as this
study did not differentiate between religious and moral values in measuring the source
of respondents’ internal values, there was a possibility that their internal values may be
derived from both sources.
The second obvious limitation was that the questionnaires were distributed
mainly to public and private companies located in Kuala Lumpur and Putrajaya,
which means only the urban areas were covered. It can be argued that location plays
an important role in shaping an individual’s perception towards certain crimes,
particularly tax evasion, as pointed out by Burton et al. (2005). Hence, caution should
be exercised in generalising these findings to all individual taxpayers in Malaysia
because they may not truly represent the entire population. The final limitation of
this study was the use of face-to-face interviews in a cross-cultural study that related
to the sensitive topics of tax compliance and religiosity. The participants might
have felt uneasy and embarrassed to respond to the interviewer’s questions during
the interview process because their anonymity was not fully preserved (Sturges and
Hanrahan, 2004). It may have led to information that did not really represent their
true perceptions.

7. Concluding remarks
This study has shown that Malaysians are considered to have a strong positive tax
compliance attitude which supports the IRBM mission to foster voluntary tax
compliance among Malaysians. However, this positive attitude is not strongly
influenced by religious values held by almost all Malaysians across religions as shown
in the regression results in the present study whereby religiosity can only explain 3 per
cent of an individual’s willingness to voluntarily abide by tax laws. The true religiosity
commitment that influences taxpayers’ willingness to pay taxes is intrapersonal
religiosity.
 ARJ The findings of this study could have two main implications, particularly to the tax
authority. First, the main reason of “zakat” being treated as a rebate should be explained
27,1 clearly to all taxpayers or reviewed to avoid strong negative sentiments among ethnic
groups that may lead to a more serious problem in the country. Second, the strong
religious values held by most Malaysians probably can be used to encourage them to
increase their willingness to comply with tax laws by designing targeted policy to cater
86 to different attitudes of taxpayers with appropriate strategies. Designing policies that
benefit citizens as a whole and developing a common understanding between these
parties may increase taxpayers’ willingness to pay taxes for the benefit of the country.
This remains an important challenge for the authorities.
The key direction for future research from the present study is to compare the impact of
individuals’ religious values with individuals’ moral values that have no influence from
religion on tax compliance. This could be done by comparing a group of taxpayers who
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adhere to a religion with another group of taxpayers who claim to have no religion. It would
provide additional information in distinguishing the independent impact of moral and
religious values on tax compliance so that comparisons between these two factors can be
made. Even with its limitations, this Malaysian study has provided evidence that religiosity
is important in helping to explain highly compliant taxpayers’ attitudes.

Notes
1. The actual number of tax audits undertaken was not provided in this report.
2. Even though the fiscal psychological approach had been introduced earlier, it only began to
draw researchers’ attentions in the 1990s.
3. However, it could be argued that the level of religiosity is difficult to determine objectively.
4. The latest Population and Housing Census of Malaysia 2010 data were not available when
this study was carried out.
5. The out-of-frame replies were mainly due to an incomplete response. The net sample frame
was 492 and usable responses were 197. Thus, the usable response rate is 40 per cent.
6. The total score for the intrapersonal religiosity items is 30 (5 ⫻ 6).
7. The total score for interpersonal religiosity items is 20 (5 ⫻ 4).
8. It is an obligation for Muslims to pay “zakat” at a fixed rate of 2.5 per cent from the total
wealth such as income when a certain amount of money called “nisaab” is reached for one
complete “haul” or equivalent to one “Hijri” year (about 334 days).
9. Some of the comments in certain issues such as duty as a citizen and social contribution
received from the survey questionnaires confirmed the findings gathered from the interviews.
10. The impact of other religious payments such as tithing in Christianity was not investigated
because tithing or other religious payments are not treated as a rebate in calculating
individual taxation in Malaysia. This is because these payments are not made compulsory to
all members of each religion as compared to “zakat”. “Zakat” is a Muslim’s obligation and
stated in the five pillars of Islam.
11. Subhanahu Wata’ala means glorified and exalted.
12. The term “participants” in this section refers to the participants from the interviews.
13. The term “respondents” in this section refers to the respondents from the surveys.
14. It states that “a rebate shall be granted for any “zakat”, “fitrah” or any other Islamic religious
dues, payment of which is obligatory”.
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 Further reading Religiosity on
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taxpayers’
About the authors compliance
Raihana Mohdali is a Lecturer at the UTM Razak School of Engineering and Advanced attitudes
Technology, Universiti Teknologi Malaysia, Kuala Lumpur, Malaysia. Raihana Mohdali is the
corresponding author and can be contacted at: raihana@ic.utm.my
Jeff Pope is a Professor and Director of the Tax Policy Research Unit, School of Economics and
91
Finance, Curtin University, Perth, Australia.
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