| Improvement of Corporate Tax Audit: Factor of Increasing Tax Compliance in Malaysia |

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Table of Contents

Executive Summary 3
Introduction………………………………………………………………………………………..4
Tax Compliance, Tax Evasion and Tax Audit…………………………………………………….4
Tax Audit in Malaysia…………………………………………………………………………….6
Organization Structure…………………………………………………………………………….8
Tax Audit Process…………………………………………………………………………………9
Tax Audit: Constraints and Problems……………………………………………………………11
Recommendations………………………………………………………………………………..16
Conclusion……………………………………………………………………………………….18
References……………………………………………………………………………………….19
Appendix………………………………………………………………………………………...20

Executive Summary The Malaysian tax system follows the concept of self-assessment system (SAS). Under the SAS, the government trusts and gives taxpayers full responsibility to calculate, to pay and to report their tax due on their own. The success of SAS not only depends on the good tax administration but also depends on the taxpayer awareness, which is indicated by the taxpayer compliance in fulfilling his obligation. In order to enhance the level of tax compliance, the Inland Revenue Board of Malaysia (IRBM) considers that it can be achieved by law enforcement besides tax consultation and tax service. Law enforcement comprises of tax audit, tax investigation and tax collection. Tax audit becomes important since it can cause a deterrent effect to increase taxpayer compliance. Tax audit plays an important role in determining the extent to which taxpayers can be made to comply with the laws and regulations. Tax audits are particularly useful in checking the most subtle forms of non-compliance i.e. evasion and avoidance. However, the low audit coverage of the IRBM, especially on field audit, has been below 5% and complaints from taxpayers and tax agents have been raised on the field audit approach. What kind of