Public acceptance and compliance on goods and services tax (GST) implementation: A case study of Malaysia

Abstract

The Goods and Services Tax is a broad based consumption tax covering all sectors. Malaysian government introduced this GST from April 2015. GST is replacing sales and services tax which is levied on the supply of goods and services at each stage of the supply chain from the supplier up to the retail stage of the distribution. The aim of present study is to investigate how the pertinent factors will influence the acceptance and compliance of GST system among the general people in Malaysia. From extensive literature review, four factors namely; price stability, government subsidies, income equality and readiness issues, have been identified that may affect the acceptance and compliance of GST. For collecting data, a structured questionnaire survey was conducted among 400 respondents. Findings show that there is statistically significant and moderate negative relationship between price stability and acceptance and compliance of GST and it indicates that consumers’ willingness to comply and accept the new indirect tax reform will decrease if GST causes the price of goods and services to rise. Income inequality was found to be negatively correlated with acceptance and compliance of GST and it means that the perceived inequality driven by the implementation of GST will reduce the people’s acceptance and compliance on GST. Readiness was positively correlated to people’s acceptance and compliance of GST. Study findings also implied weak positive relationship between government subsidies and acceptance and compliance of GST. This research will allow the policy makers a step closer in understanding the voice of public. Nevertheless, government needs to take necessary approaches such as greater openness and transparency in order to gain support from the public.