TAX COMPLIANCE DILEMMA AMONG TIKTOK SELLERS IN MALAYSIA

 

 

 

 

By Norizam binti Ahmad @ Muhammad & Fa’izah binti Ghazi Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Perlis.

 

The rise of social media platforms such as TikTok has had a significant impact on the way businesses operate. In Malaysia, a growing number of businesses are using TikTok to sell their products and services. This has led to a need for a better understanding of the factors that influence tax compliance among TikTok sellers. The rise of e-commerce has also created new challenges for tax authorities, who must ensure that all businesses, regardless of their size or mode of operation, comply with tax laws and regulations.

Tax compliance is a critical issue for e-commerce operators in Malaysia, particularly those who use social media platforms to conduct their business. The factors that influence tax compliance among TikTok sellers in Malaysia are somehow complex and complicated. The nature of TikTok as a platform where the sellers generate income through unconventional means such as brand partnerships, sponsored content and fan donation poses unique challenge for tax compliance. According to Mahran et al. (2023), tax knowledge and morale were found to positively influence tax compliance among sellers who use TikTok platform to sell their products in Malaysia. This is consistent with previous research by Alm and Torgler (2004) that found the tax education and awareness programs can improve tax compliance behaviour among the taxpayers.

Additionally, e-commerce operators who have a positive attitude towards tax compliance are more likely to voluntarily comply with tax laws (Abd Hamid et al., 2019). However, the study found that tax awareness and complexity did not significantly affect compliance. This is consistent with the findings of Shahroni et al. (2022), who found that tax awareness alone may not be sufficient to promote tax compliance among e-commerce operators. This suggests that e-commerce operators may not be aware of their tax obligations or may find it difficult to navigate the tax system, but these factors do not necessarily impact their compliance behaviour. For example, an e-commerce operator may not be aware of their tax obligations but may still comply with tax laws if they have a positive attitude towards tax compliance. On the other hand, an e-commerce operator may be aware of their tax obligations but may not comply with tax laws if they have a negative attitude towards tax compliance.

As noted by Mahran et al. (2023), one of the main challenges faced by TikTok sellers in Malaysia is the lack of understanding of tax laws and regulations. The study found that low levels of tax awareness were observed among TikTok sellers which could lead to non-compliance with tax laws. This lack of awareness could be due to the fact that many e-commerce operators are small business owners who may not have the resources to hire tax professionals or attend tax education programs. Due to a lack of tax awareness, some taxpayers did not correctly report the amount of tax (Sitorus, 2018). In the context of e-commerce, Khamis and Mastor (2021) and Adam et al. (2021) found that tax awareness and tax compliance are positively correlated among e-commerce players.

Tax knowledge is another important factor that plays a crucial role in enhancing taxpayers' behaviour in tax compliance. Abdul Hamid et al. (2020) claimed that the level of taxpayers' knowledge of taxation could affect tax compliance. This is consistent with the statement made by Hamid et al. (2022), where knowledge of taxation is a valuable instrument to comply with the tax. Bernard et al. (2018) stated that improving tax knowledge could boost taxpayers' viewpoints towards tax compliance. The authors also noted that an optimistic view on tax led to a decrease in the wrong impression of tax and increased tax compliance. Thus, it is essential to provide taxpayers with adequate tax education to improve their tax knowledge and promote tax compliance behaviour.

Another challenge faced by TikTok e-commerce operators in Malaysia is the difficulty in keeping track of income and expenses. As noted by Abd Hamid et al. (2019), online players evaluate the detection risk for tax evasion as low since detecting income or revenue associated with online transactions is somewhat challenging, making the probability of being caught perceived as low. This could lead to underreporting of income and understating of liability in tax returns, resulting in tax revenue losses for the government. Furthermore, the lack of a physical presence among e-commerce operators makes tax enforcement challenging, making it more complex than for traditional businesses whose physical presence can be easily identifiable (Shahroni et al., 2022).

TikTok sellers in Malaysia face several challenges when it comes to tax compliance, including the lack of knowledge in understanding the tax laws and regulations (Mahran et al. (2023). Thus, there is a need for more awareness and education on tax compliance among e-commerce players. Conducting workshops and seminars to educate them about the importance of tax compliance and the consequence of non-compliance is one the ways to increase tax compliance. To reach a larger audience, Lembaga Hasil Dalam Negeri Malaysia (LHDNM) as a national tax authority should utilise information technology, especially social media, to provide awareness and tax information.

The tax authority can collaborate with influencers to educate the public about tax compliance in the e-commerce sector. Influencers, with their large followers and ability to reach a wide audience, can help to spread awareness about the importance of tax compliance and the benefits it brings to society. By partnering with influencers, tax authorities can leverage their reach and influence to promote tax compliance among e-commerce players and the public. This collaboration can be an effective way to increase awareness and understanding of tax obligations, and ultimately improve compliance in the e-commerce sector.

These strategies not only benefit the tax authority and e-commerce players, but also contribute to a more transparent and fair society by significantly increasing government revenue. As we move forward, it is crucial to continue exploring and implementing innovative strategies to improve tax compliance in the ever-evolving e-commerce landscape. The future of tax compliance in Malaysia is uncertain, but the strategies mentioned above provide a good starting point. As the e-commerce landscape continues to evolve, it is important to stay up to date on the latest developments and to adapt our strategies accordingly.

 

REFERENCES

Abd Hamid, N., Ibrahim, N.A., Ibrahim, N.A., Ariffin, N., Taharin, R. & Jelani, F.A., (2019). Factors affecting tax compliance among Malaysian SMEs in e-commerce business. International Journal of Asian Social Science, 9(1),74-85.

Abdul Hamid, N., Rasit, Z.A., Ishak, A.I.B., Abd Hamid, R.B., Abdullah, F.A.B. & Sanusi, S., (2020). Determinants of tax compliance among Grabcar in Malaysia. International Journal of Innovation, Creativity and Change, 10(11), 2020.

Adam, S.M., Shagari, S.L., Baba, B.U. & Saidu, S., (2021). Determinants of e-commerce users’ behaviour on tax compliance intention in Nigeria: A conceptual model. International Journal of Intellectual Discourse, 4(1), 88-103.

Alm, J., & Torgler, B. (2004). Culture differences and tax morale in the United States and in Europe. Social Science Research Network. https://doi.org/10.2139/ssrn.562861.

Bernard, O.M., Memba, F.S. & Oluoch, O., (2018). Influence of tax knowledge and awareness on tax compliance among investors in the export processing zones in Kenya. International Journal of Scientific Research and Management, 6(10),728-733.

Hamid, N.A., Ismail, I.S., Yunus, N., Jali, M.N. & Rosly, A.S., (2022). Taxpayer perceptions of tax awareness, tax education, and tax complexity among small and medium enterprises in Malaysia: A quadrant analysis approach. Universal Journal of Accounting and Finance, 10(1), 231-242.

Khamis, I.H. and Mastor, N.H., (2021). Service Quality, Tax awareness and Tax fairness as determinants of tax compliance among e-commerce enterprises in Malaysia. International Journal of Academic Research in Business and Social Sciences, 11(2), 938-951.

Mahran, M., Abdul Rashid, S. F., Ramli, R., & Abu Hassan, N. S. (2023). Factors influencing tax compliance among TikTok users engaged in e-commerce activities in Malaysia. Asia-Pacific Management Accounting Journal, 18(2), 238–242.

Shahroni, N.A.H., Jusoh, Y.H.M., Mohamed, W.M.F.W., Salleh, M.S.M. & Mustafa, W.M.W., (2022). Post Covid-19 and e-commerce in Malaysia: Tax compliance evidence among Youtubers, Instafamous and Facebookers. Asian Journal of Accounting and Finance, 4(1), 26-42.

Sitorus, R.R., (2018). Does e-commerce effect on total tax paid through taxpayer’s compliance. Journal of Accounting, Business and Finance Research, 4(2), 40-48.

THE EMERGENCE OF ENVIRONMENTAL ACCOUNTING

 

 

 

 

By Salwana Selamat and Nazirah Naiimi, Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Perlis

Environmental accounting is a crucial field that has gained increasing prominence in recent years as societies and businesses recognize the pressing need for sustainable and responsible practices. The worldwide awareness of environmental concerns has significantly increased over the last twenty years which the obvious concerns such as climate change, the exhaustion of restricted resources, and the destruction of natural habitats.  Inadequate environmental practices can significantly bring harm to both the business and its financial interests as well as the society. This article will explore on the definition, goals and challenges that associated with environmental accounting.

Yakhou and Dorweiler, (2004), defined environmental accounting as an inclusive field of accounting which provides reports for both internal uses, generating environmental information to help make management decisions on pricing, controlling overhead and capital budgeting, and external use, disclosing environmental information of interest to the public and to the financial community. It involves the systematic collection, measurement, and integration of data related to resource consumption, emissions, waste generation, and other environmental aspects into an organization's financial and managerial accounting systems. Environmental accounting is a specialized branch of accounting that focuses on quantifying, analyzing, and reporting the environmental impact and costs associated with an organization's activities, products, and services. This is in line with Stanko et al., (2006) portrayed environmental accounting as the identification, measurement, and allocation of environmental costs, the integration of these environmental costs into business decisions, and the subsequent communication of the information to a company's stakeholders.

As the environmental accounting becomes more prominent therefore the primary goal of environmental accounting encompasses the following in accordance with Association of Chartered Certified Accountants (ACCA)  (2016):

Measurement and Reporting: It refers to the processes and practices of quantifying, documenting, and communicating financial and non-financial information related to an organization's environmental activities and impacts. This would help investors to understand the extent of environmental impacts.

Compliance: Environmental accounting compliance refers to the practice of complying with accounting standards and principles that specifically relate to environmental issues. This includes the accurate recording and reporting of financial information related to environmental activities and obligations in accordance with relevant laws, regulations, and accounting policies. Environmental accounting compliance helps organizations track, measure, and disclose their environmental performance and financial impacts, ensuring transparency and accountability in their environmental reporting.

Cost Management: Identify and manage environmental costs that enable organizations to reduce expenditure associated with resource use, waste management, and pollution control.

Resource Efficiency: Promote resource efficiency by analyzing data and identifying opportunities to reduce resource use and improve processes. Enhancing the resource efficiency of an organization is a key factor in boosting its competitiveness. Improving resource efficiency within a company therefore has significant potential to reduce production costs, increase productivity and simultaneously playing a substantial role in addressing environmental issues.

Risk Assessment and Management: Assess and manage environmental risks, including potential liabilities and reputational risks associated with poor environmental performance.

Decision Support: Provide relevant information for decision-making within the organization to encourage investment in sustainability and environmentally conscious practices.

Sustainability: Support sustainability efforts by tracking progress towards environmental goals and identifying areas for improvement. The idea of sustainable development, which emphasizes the preservation of natural resources and the recognition of their value in financial reporting, has increased the responsibility of stakeholders in the field of environmental accounting. In the early stages of economic development, natural resources were not given adequate priority.

Benchmarking: Compare an organization's environmental performance with industry benchmarks and best practices to promote competitiveness and innovation.

Stakeholder Engagement: Engage with stakeholders interested in the organization's impact on the environment, promoting trust and demonstrating commitment to responsible business practices.

 

These goals collectively aim to integrate environmental considerations into an organization's decision-making processes, financial reporting, and overall business strategy, fostering sustainability and responsible environmental stewardship.

Challenges and barriers in the field of environmental accounting as outlined by Hossain (2019) include:

Data Quality and Availability: The difficulty of obtaining accurate and reliable environmental data, particularly for non-financial aspects, can hinder effective environmental accounting.

Complexity and Standardization: The complexity of environmental issues and the absence of standardized accounting methods can make the development of consistent and comparable environmental challenging. The accounting profession has some recognized accounting standard for the conduct of accounting practice, but there is no recognized international accounting standard for environmental accounting.

Costs and Resource Constraints: Establishing and maintaining environmental accounting systems can be costly, especially for smaller organizations with limited resources. Implementing environmental accounting and reporting will require additional human resources and financial investments. Many businesses, unless mandated by regulations, might be reluctant to bear these additional expenses. Therefore, the prospect of incurring extra costs can be viewed as a challenge in the adoption of environmental accounting.

Data Integration: Integrating environmental data with financial accounting systems can be technically challenging and may require significant information technology infrastructure. Accounting functions as an information system, yet its effectiveness is compromised when there is insufficient data, leading to challenges in the accurate recording and presenting financial data, as accountants may struggle to make proper entries due to the lack of necessary information.

Regulatory Compliance: Complying with ever-evolving environmental regulations and ensuring compliance in reporting can be a major burden for organizations. Every organization establishes rules and regulations to ensure smooth operations and overcome various challenges. A well-defined set of rules and regulations is essential for the effective implementation of environmental accounting.

Lack of Expertise: A shortage of professionals with expertise in environmental accounting can hinder its adoption and implementation. Highly educated and skilled personnel are essential for the successful and efficient implementation of environmental accounting.

Resistance to Change: Organizations may encounter resistance to change from internal stakeholders who are used to traditional accounting practices. Various challenges may arise during the introduction and implementation of environmental accounting. It is crucial to proactively identify these challenges in advance to either minimize or overcome them. This proactive approach is essential to ensure proper implementation and achieve greater efficiency of environmental accounting practices.

Complexity of Environmental Impact Assessment: Assessing the overall environmental impact of an organization's activities, products, or services can be complicated and involve various interconnected factors.

The absence of numerical measures for environmental issues: Only a small number of manufacturing organizations provide numerical information, and this has a detrimental impact on the practice of environmental accounting.

Short-Term Focus: Businesses may prioritize short-term financial gains over long-term environmental sustainability, creating a barrier to the adoption of environmental accounting.

Public Perception: Negative public perception or skepticism about the authenticity of environmental accounting efforts can be a barrier to its adoption.

Integration with Strategy: Aligning environmental accounting with an organization's strategic objectives can be challenging, particularly when environmental considerations are not integrated into core business strategies.

Addressing these challenges and barriers are essential for the successful implementation of environmental accounting and its integration into an organization's sustainability efforts and decision-making processes. In summary, environmental accounting plays a key role in the modern era, addressing the pressing requirement for organizations to quantify their environmental effects and sustainable initiatives. This approach not only ensures adherence to severe regulations but also offers a structure for businesses to proactively participate in conserving the environment, practicing responsible resource stewardship and well-being of what is being managed.

 

 

REFERENCES

ACCA. (2016, June 27). Environmental Management Accounting. ACCA Global. https://www.accaglobal.com/an/en/student/exam-support-resources/professional-exams-study resources/p5/technical-articles/environmental-management.html

Hossain, M. M. (2019). Environmental accounting challenges of selected manufacturing enterprises in Bangladesh. Open Journal of Business and Management, 7(02).

Stanko, B.B., Brogan, E., Alexander, E., & Chay, C. (2006). Environmental Accounting. Business & Economic Review, 52(3).

Yakhou, M., & Dorweiler, V. P. (2004). Environmental accounting: An essential component of business strategy. Business Strategy and the Environment, 13(2).