Human Behaviour plays an essential role to follow tax rules and avoidance of the behaviour of humans in tax systems. A taxpayer’s decision helps to engage tax payment and improves multiple activities to expand the tax systems and rules (Al Mamun et al. 2019). The tax regulations of Malaysia are specifically improving human behaviour and developing the taxpayer’s implementation. The decision of taxpayers helps to expand the rules of tax payment that develop tax compliances and behaviour (Srithara et al. 2023). Tax avoidance describes the behaviour of taxpayers and reduces tax obligations with the help of effective rules and regulations of the tax system in Malaysia. “Non-compliance tax system” occurs in the global areas. The lack of a tax system has affected the overall business performance of the country and affected the economic condition of the country.

In this context, it will be necessary to expand the intention of taxpayers and change tax rules and regulations in Malaysia. The current proposal will discuss tax penalties and tax compliance. Despite these, tax rules and regulations help to influence “tax awareness and penalties, morals and complexity and tax fairness” and improve the intention of the tax system. Tax compliance is essential to develop society between rich and country (Tee & Bidin, 2020). However, the “Non-Compliance tax system” helps to motivate people to reduce the tax liabilities of a people or organisation in Malaysia. Tax Compliances of Malaysia provides effective rules and regulations for taxpayers. 

On the other hand, “the theory of attribution” helps to motivate people and provide the basic need of a person before taking action (Proudfoot & Shaver, 2019). The attribution of the theory helps to influence human behaviour. Internal and external factors of the tax systems will develop with the help of the rules and policies of the tax system (Obaid et al. 2020). The attributes of tax systems help to suggest the essential activities of tax liabilities. It helps to promote the economic development of a country. Some specific tax systems help to improve positive attitudes and suggest more facilities. The tax penalty is one of the parts of the tax system.

A tax penalty is one type of punishment that faced most people who are not follow the rules and regulations of tax systems. Paying tax at the perfect time is the personal responsibility of every taxpayer. Therefore, paying on time helps to reduce tax-related challenges for individuals (Dare, 2020). Tax penalties promoted the rules and regulations of tax systems and improved the procedures of tax penalties. Tax compliance has involved the administration of laws and regulations related to tax systems. Some effective violence occurs if people did not follow tax rules and regulations. Tax penalty helps to promote tax awareness and follows regulations forcefully. Therefore, people will get punishment with the help of the tax system. Confidence is part of a tax system that helps to improve tax systems in Malaysia (Alshira’h et al. 2020). Tax Morale provides a proper attitude toward tax systems that helps to motivate people about the tax system in Malaysia.

Tax morale helps to fulfil civic responsibilities and provide the right amount of tax at the perfect time. Tax paying is one of the national responsibilities of people. Tax collection is helping to develop society and country regulations (Sritharan & Salawati, 2019). Effective tax morale provides proper tax compliance that helps to promote tax collection. Tax awareness helps to utilize the tax system of the Malaysian market. These are helping to develop tax laws and rules for the country. Proper tax awareness helps to indicate the importance of tax systems for public welfare. Tax awareness helps to promote tax compliance and provides well-being in Society. Tax Complexity provides difficulties for taxpayers.

Figure 1.3: Provisions of ITA 1967

(Source: Landco, 2023)

It has connected with tax laws and instruments. Taxpayers faced so many issues and challenges in compliance with tax systems. Some effective tax rules and procedures help to motivate people to utilize accurate laws and regulations of tax systems. In Malaysia, after the deadline for Income tax payment occurred more issues and penalties. Some specific penalties affected the income level of a person. There are “Provisions under ITA 1967” has more sections for penalties including “Section 103 (3), Section 107B (3), Section 112(1), Section 113 (1), and Section 114 (1) and Section 119 (a), Section 116” and others such sections (Landco, 2023). In this section, the researcher will discuss these Sections including “103 (3), Section 112(1), Section 113 (1), and Section 119 (a)”. Section 103 (3) provides a penalty of a “10% increment from the tax payable” for delayed payment of Income taxes and Section 112 (1) provides “A fine up to RM20,000 / Imprisonment not exceeding 6 months / Both” penalty for “failure to design an income Tax Return form”.

On the other hand, Section 113 (1) provides “A fine up to RM20, 000 / Imprisonment not exceeding 6 months / Both” for incorrect tax returns. “Section 119 (a) provided fails to maintain proper records and documentation”. Despite these, Section 114 (1) provides “A fine up to RM20,000 / Imprisonment not exceeding 3 years / Both & 300% of the tax undercharged” for “Wilfully and with intent to evade or assist any other person to evade tax” (Landco, 2023). These all penalties have been provided to reduce non-compliances taxes and other such challenges. Therefore, it can be said that the Income Tax Department helps to utilize the overall performance rate of the government. The Government of Malaysia publishes effective rules and regulations to maintain the Income Tax compliances and procedures. It is observed that it helps to develop economic growth in the country.