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Applying the Theory of Planned Behavior to SME Tax Compliance:
A Conceptual Literature Review and Firm-Level Framework

Azmeer Nasri, Yusri Hazrol Yusoff

Faculty of Accountancy, Universiti Teknologi MARA (UiTM), Shah Alam, Selangor, Malaysia.

DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000203

Received: 07 October 2025; Accepted: 14 October 2025; Published: 07 November 2025

ABSTRACT

This conceptual review examines the applicability of the Theory of Planned Behavior (TPB) in understanding
tax compliance behavior among small and medium enterprises (SMEs). While TPB has been widely applied to
individual behavior, its extension to firm-level analysis remains limited. The study synthesizes existing literature
to propose a firm-level framework that operationalizes TPB’s three constructs, namely attitude, subjective norms,
and perceived behavioral control, within organizational and legal contexts. It integrates Malaysia’s statutory
framework and emphasizes that firms express behavioral intentions through legally authorized representatives
such as directors and managers. The findings indicate that TPB provides a coherent and adaptable framework
for analyzing SME tax compliance when its constructs are interpreted through managerial attitudes, stakeholder
expectations, and perceived resource control. The review highlights theoretical, practical, and methodological
contributions by demonstrating TPB’s adaptability beyond individual agency and by offering policymakers
insights into enhancing compliance through behavioral and institutional interventions. The study concludes by
proposing directions for future empirical research to validate the conceptual framework of firm-level tax
compliance behavior.

Keywords: Theory of Planned Behavior; Tax Compliance Behavior; Small and Medium Enterprises; Firm-
Level Compliance; Malaysia.

INTRODUCTION

Taxation is a foundational mechanism through which governments mobilize revenue, finance public expenditure,
and sustain economic development. An effective tax system ensures fiscal stability and enables the delivery of
essential public goods while promoting equity and embedding social responsibility among economic actors.
However, the effectiveness of any tax system depends not only on its legal and administrative design but also
on taxpayer compliance behavior (OECD, 2021).

Tax behavior refers to how individuals or entities perceive, evaluate, and act upon their tax obligations.
Traditional economic models, which view taxpayers as rational agents weighing compliance costs against
detection risks, have been criticized for oversimplifying real-world dynamics (Allingham & Sandmo, 1972). In
response, researchers increasingly adopt behavioral perspectives, emphasizing intrinsic motivations, social
norms, and trust in authorities as explanations of compliance (Alm, 2019).

Small and medium enterprises (SMEs) are particularly important in this regard. SMEs typically operate with
modest capital and limited resources yet contribute substantially to GDP and employment. In Malaysia, SMEs
represent more than 97 percent of business establishments, underscoring their economic significance (SME
Corporation Malaysia, 2023). Nevertheless, they face challenges in meeting tax obligations due to limited
resources, complex regulations, and gaps in knowledge. These challenges raise the risk of both intentional and
unintentional noncompliance. Importantly, such challenges are not unique to Malaysia but are shared by SMEs
in many jurisdictions, making the Malaysian case illustrative of broader global issues.

The Theory of Planned Behavior (TPB), formulated by Ajzen (1991), offers a robust framework for examining
compliance choices. TPB posits that behavioral intention, shaped by attitudes, subjective norms, and perceived

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behavioral control, is the immediate antecedent of behavior. While its predictive power at the individual level is
well established (Ajzen, 2020), its application to organizations has received limited attention. Within SMEs,
TPB has the potential to explain how managerial attitudes toward taxation, normative pressures from
stakeholders, and perceptions of control over compliance resources collectively shape organizational intentions
and compliance behavior.

Accordingly, this conceptual review proposes a framework for applying the Theory of Planned Behavior (TPB),
originally designed for individuals, to the firm level for understanding SME tax compliance behavior.
Establishing this applicability requires conceptual clarification of how firms legally express intentions and
behaviors. Since organizations act through natural persons empowered by law, it is necessary to clarify who
represents the firm for the purpose of operationalizing TPB constructs. While this introduction establishes the
conceptual basis for applying TPB to SME compliance, the next section identifies the limitations of prior
research and clarifies the theoretical gaps that must be addressed before TPB can be meaningfully applied at the
firm level.

Problem Statement

Although the Theory of Planned Behavior (TPB) has been widely validated for predicting individual behavior,
its application to organizations remains underdeveloped. The theory was originally conceptualized to explain
individual agency, which raises the important question of whether its constructs of attitudes, subjective norms,
and perceived behavioral control can also be meaningfully applied to collective entities such as firms. Small and
medium enterprises (SMEs) provide a particularly relevant setting to explore this question. SMEs are vital
contributors to economic growth and employment, yet they face distinct compliance challenges resulting from
limited resources, regulatory burdens, and knowledge gaps.

Existing research provides some evidence that TPB may be applied to SMEs, but the findings are fragmented
and inconsistent. Studies confirm the influence of attitudes and perceived behavioral control, yet results for
subjective norms remain mixed and inconclusive. Many of these studies also rely on self-reported data from
managers without linking responses to observable compliance outcomes, which limits their explanatory strength.
Furthermore, applications of TPB to organizations are often geographically narrow and rarely tailored
specifically to SMEs, leaving important contextual realities unaddressed.

To address these shortcomings, this study proposes a conceptual framework that applies TPB at the firm level
by anchoring its constructs in the organizational and legal context of SMEs. Attitudes are interpreted as
managerial and corporate values toward taxation, subjective norms as institutional and stakeholder expectations,
and perceived behavioral control as the firm’s ability to comply based on resources, systems, and clarity of
regulations. By operationalizing these constructs through legally recognized representatives such as directors
and managers, the study tests whether TPB, originally designed for individuals, can be validly applied to firms
to analyze tax compliance behavior.

Given these conceptual gaps, it is important to clarify the legal dimension of organizational behavior. Since
firms do not act on their own but through representatives empowered by law, the next section outlines the legal
foundations that define how companies express intentions and fulfill compliance obligations in Malaysia.

Legal Foundations of Firm-Level Compliance

Applying the Theory of Planned Behavior (TPB) to firms requires recognizing the distinct legal character of
organizations. Unlike individuals, companies are artificial legal persons that possess rights and obligations but
cannot act independently. Their intentions and actions must be expressed through natural persons authorized by
law. For SMEs this distinction is essential, because the TPB constructs of attitudes, subjective norms, and
perceived behavioral control can only be understood through the behavior and decisions of those who legally
represent the firm.

In Malaysia, the Companies Act 2016 establishes the framework for such representation. The Act defines a
company as a body corporate with a separate legal personality (section 20) and places responsibility for

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managing its business and affairs on directors (section 211). Each company must also appoint at least one
company secretary to oversee statutory filings and compliance (section 236). Authority may be delegated further
to directors, employees, or other persons (section 210). Additional provisions, such as the Powers of Attorney
Act 1949 and the Contracts Act 1950, extend representation to third parties, making principals legally bound by
the acts of their authorized agents.

Tax law reinforces these principles. Under the Income Tax Act 1967, directors, managers, or principal officers
are held responsible for a company’s tax obligations (section 75). Similarly, the Sales Tax Act 2018 requires
registered manufacturers to account for tax and furnish returns (sections 2, 3, and 33), while the Service Tax Act
2018 imposes equivalent obligations on registered taxable persons (sections 2, 11, and 13).

Taken together, these provisions clarify the natural persons through whom firms act in matters of compliance.
For the purposes of TPB, this legal framework provides the operational bridge from individual constructs to
organizational behavior. Directors, managers, and other authorized officers embody the firm’s attitudes toward
taxation, respond to normative pressures from regulators and stakeholders, and perceive the resources and
regulatory clarity that define its ability to comply. This legal grounding sets the stage for the literature review,
which examines how TPB has been applied across disciplines and explores its potential extension to SME tax
compliance.

LITERATURE REVIEW

The Theory of Planned Behavior (TPB), developed by Icek Ajzen in 1985, is a psychological framework that
predicts human behavior through three core constructs: attitudes, subjective norms, and perceived behavioral
control (PBC), which collectively influence behavioral intentions (Bellová & Špírková, 2021). TPB has
demonstrated broad applicability across diverse health and behavioral domains, including hypertension
prevention (Sukohar & Suharmanto, 2021), personalized nutrition adoption (King et al., 2024), rheumatoid
arthritis self-management (Al-Shamali et al., 2023), and green energy behavior (Kumar & Nayak, 2022). Meta-
analyses reveal attitude as the strongest predictor of behavioral intention, followed by subjective norms and PBC
(Kumar & Nayak, 2022). Furthermore, research indicates TPB-based interventions are effective for chronic
disease management, particularly in low-resource settings (Paul et al., 2022). In some contexts, scholars have
argued that predictive accuracy can be improved by enhancing the original TPB model with additional factors
such as past behavior, particularly in energy-saving applications (Andini & Low, 2022).

While TPB provides a structured lens for understanding human behavior, broader behavioral research also
encompasses diverse theoretical and methodological approaches. The Human Behaviour Ontology defines
"individual human behaviour" as "a bodily process of a human that involves co-ordinated contraction of striated
muscles controlled by the brain," offering a comprehensive framework that organizes 230 behavioral classes
across experiences, expression, and social interactions (Schenk et al., 2024). Other perspectives focus on
Activities of Daily Living, analyzing macro-level tasks and body movement sequences to explain complex
behavior (Thakur & Han, 2020). Character Computing approaches behavior through the Character-Behavior-
Situation triad, integrating personality traits, cognitive states, and social contexts (Herbert, 2020). Modern
technologies further enhance behavioral research through real-time monitoring enabled by sensors and
computational models (Dávila-Montero et al., 2021), while machine learning techniques analyze unstructured
textual data to detect behavioral indicators and predict patterns (Davahli et al., 2020). Collectively, these
interdisciplinary approaches address societal challenges, while scholars emphasize the importance of ecological
validity and inclusivity in behavioral studies (Box-Steffensmeier et al., 2022).

Tax compliance represents one important domain of behavior. It is broadly defined as taxpayers' adherence to
obligations and regulations, involving awareness and compliance with tax laws established by governments and
tax authorities (Javad Dejlani et al., 2024). From a practitioner’s perspective, compliance extends beyond
taxpayers to include tax authorities, judges, and consultants, encompassing law abidance and risk mitigation
(Syamsudin et al., 2023). Tax compliance plays a crucial role in ensuring sustainable government revenue for
infrastructure and public services (Esmael Abdu & Mohammd Adem, 2023). However, persistent challenges
such as tax system complexity, insufficient awareness, and institutional weaknesses continue to undermine
compliance (Esmael Abdu & Mohammd Adem, 2023). Research highlights that tax fairness and isomorphic

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forces positively influence compliance behavior (Edward Nartey, 2023). At the same time, technology creates
mixed effects, potentially reducing traditional evasion opportunities while also introducing new risks (J. Alm et
al., 2020). Notably, tax compliance research has grown significantly across countries and disciplines, reflecting
the global importance of this issue (Fauzan Fauzan et al., 2022).

In this broader context, small and medium-sized enterprises (SMEs) hold a particularly significant position.
Research reveals that SME representation occurs through multiple channels and actors. In emerging markets,
SME managers often act as firm representatives by engaging in Interactive Network Branding, where
interpersonal interactions shape corporate identity and network positions (Koporcic, 2020). Formal
representation in chambers of commerce varies by organizational models, with sectoral approaches offering the
most potential for balanced representation (Marciniak, 2024). Policy development for SMEs similarly involves
diverse stakeholders, including financial authorities, government agencies, and SME representatives themselves
(Permatasari & Gunawan, 2023). At the international level, collaborative platforms such as the OECD bring
together financial institutions, policymakers, and SME actors to advance sustainable finance initiatives (Peck et
al., 2022). Additionally, institutions such as the SME Ombudsman provide specialized protection for
entrepreneurs' rights (Łukawska, 2021). SMEs are also required to maintain proper licensing and legality to
ensure effective operations (Maulana et al., 2021). Their significant contribution to national economies
underscores the importance of accurate and representative data for policymaking and analysis (Kalemli-Özcan
et al., 2024).

The roles of SME representatives are therefore multifaceted. Owners and managers bear responsibility for risk
management, requiring foresight and mitigation strategies, though limited resources often restrict their capacity
(Havierniková & Betakova, 2020). Representative competencies have a direct influence on financial outcomes,
with managerial skills strongly linked to accounts receivable management and performance (Lee, 2021). In the
domain of cybersecurity, SME leaders must establish roles and awareness frameworks despite resource
constraints (Lejaka et al., 2023). Their responsibilities extend into corporate social responsibility (CSR), where
representatives act as adopters, brokers, generators, and transmitters within supply chains (Stekelorum, 2020).
Through these activities, representatives not only shape corporate identity and reputation but also strengthen
customer loyalty and performance outcomes (Koporcic, 2020).

Decision-making within SMEs further reflects the critical influence of representatives and contextual factors.
Social media analytics is shown to enhance innovation and adaptability, strengthening strategic decision-making
(Dimas Nugroho & Putri Angela, 2024). Industry and market conditions affect the adoption of Business
Intelligence solutions, though market influences remain consistent across sectors (Mirasbek Nurseit & Andrea
Tick, 2022). Entrepreneurs’ decision-making styles impact SME financial performance, mediated by culture,
education, and networks (S. Weerasekara & Ramudu Bhanugopan, 2022). Personal information access also
strongly shapes entrepreneurial choices (Mohammad Fotouhi Ardakani & Razieh Khojasteh Avorgani, 2021).
Moreover, emotional states influence financial decisions through cognitive heuristics (Nurazleena Ismail et al.,
2022). The evidence suggests that informed decision-makers develop proportionate compliance programs, while
uninformed ones risk inadequate responses to regulatory pressures (Christian Hauser, 2021). The role of
financial information is equally critical, as accounting reports and accounting information systems significantly
improve decision-making effectiveness (Hamood Mohammed Al‐Hattami, 2022).

SME-level behavior also extends to interactions between representatives, employees, and environmental
contexts. Representative brokers, for instance, help moderate the effects of environmental uncertainty on
networking, especially under low uncertainty conditions (Srivastava, 2020). Employee behavior is significantly
affected by person-organization fit, with innovative behavior mediating performance outcomes (Pudjiarti &
Hutomo, 2020). Training perceptions also contribute positively to innovation, mediated by commitment types
(Jalil et al., 2021). Strategic orientations such as locus of control and financial attitudes can influence unethical
behavior and outcomes (Syariati, 2022). Meanwhile, knowledge sharing facilitates innovative work behavior by
strengthening functional flexibility and empowerment (Yasir et al., 2021). Such innovative behavior directly
supports business performance through competitive advantage (Firdaus & Sakinah, 2023), while leadership
styles, such as transformational leadership, influence justice perceptions and innovation outcomes (Knezović &
Drkić, 2020).

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The specific domain of SME tax compliance has been investigated across multiple dimensions. Studies
consistently emphasize tax knowledge as a critical determinant, positively associated with compliance behavior
(Timothy & Abbas, 2021) Tax morale is also central, with Timothy & Abbas (2021) identifying morality as the
primary driver of compliance among Indonesian SMEs. Enforcement mechanisms such as penalties and
sanctions significantly shape compliance, though their effects vary with severity (Ali, 2020). Tax sanctions may
also moderate the relationships between knowledge, training, and compliance (Mansur et al., 2021). Service
quality from tax representatives plays a notable role (Fadhilatunisa, 2020), while internal accounting practices
emerge as the most influential factor for SMEs in Vietnam (Le et al., 2020). Other determinants include
modernization of tax systems, financial stability, taxpayer awareness, and transparency (Supriyono et al., 2021).

The application of TPB to SME tax compliance provides valuable insights into these behavioral dynamics.
Attitudes toward compliance have been shown to positively influence behavior (Suryanti, 2021), while tax
knowledge remains a strong predictor (Timothy & Abbas, 2021). Trust in government and moral obligations
further reinforce compliance intentions (Gunawan Alvien et al., 2023). However, subjective norms yield mixed
results, with some evidence suggesting SME taxpayers rely more on internal awareness than external pressures
(Suryanti, 2021). Enforcement mechanisms such as sanctions maintain positive effects (Kartikasari & Yadnyana,
2020). Both financial performance and perceived behavioral control also contribute to compliance intentions
(Hikmah et al., 2021). Ultimately, the literature underscores taxpayer consciousness about the role of tax in
national welfare as a primary driver of compliance (Sari & Maradona, 2020).

Overall, TPB has proven to be a robust framework for studying tax compliance across populations. Studies
consistently highlight the relevance of its three components of attitude, subjective norms, and PBC in explaining
compliance intentions (Bidin & Weheed, 2023). Moreover, the framework has been adapted to different contexts,
with extensions incorporating variables such as moral intensity (Al zaqeba & AL-Rashdan, 2020),
counterproductive behaviors (Harinurdin et al., 2024), and financial performance (Hikmah et al., 2021). Its
applications range from sole proprietorships to SMEs and corporate taxpayers (Harinurdin et al., 2024).
Furthermore, cultural adaptations, such as the integration of Islamic values, reflect the flexibility of TPB in
capturing different compliance environments (Bulutoding, 2022).

Importantly, empirical studies on SME tax compliance using TPB consistently select SME owners and managers
as their respondents. Data are typically collected through surveys and questionnaires directly administered to
taxpayers (Gagaring Pagalung & Hamid Habbe, 2021). For example, Hikmah et al. (2021) surveyed 209 SME
owners across 11 regencies in Central Java Province, while Bani-Khalid et al. (2022) targeted 385 Jordanian
manufacturing SMEs through systematic random sampling. Similarly, Hikmah et al. (2024) engaged 150 SMEs
across multiple cities in Central Java. Sample sizes generally range from 98 to 385 participants, focusing on
individual MSME taxpayers (Arta & Alfasadun, 2022). This consistent methodological approach positions SME
representatives as the central unit of analysis for examining tax compliance behavior through the TPB framework.

Taken together, the reviewed studies demonstrate that the Theory of Planned Behavior provides a comprehensive
framework for analyzing SME tax compliance behavior. Its three constructs attitude, subjective norms, and
perceived behavioral control align closely with key determinants identified in SME tax compliance research,
such as tax morale, knowledge, social influences, sanctions, and financial control. The consistent use of SME
owners and managers as respondents further validates TPB’s applicability at the organizational level, confirming
its suitability for investigating compliance behavior among SMEs.

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Proposed Conceptual Framework

Figure 1. Conceptual framework illustrating the firm-level application of the Theory of Planned Behavior (TPB)
to SME tax compliance. Directors and managers act as legal representatives mediating between organizational
constructs (attitude, subjective norms, perceived behavioral control) and compliance behavior.

Drawing from the reviewed literature and Malaysia’s legal framework, this paper proposes a conceptual model
illustrating how the Theory of Planned Behavior (TPB) can be applied at the firm level to explain SME tax
compliance behavior. In this framework, directors and managers act as legal and behavioral intermediaries who
translate firm-level intentions into compliance actions.

Attitude reflects managerial and corporate values toward taxation and ethical responsibility. Subjective norms
represent institutional, regulatory, and stakeholder expectations that shape perceived social obligations.
Perceived behavioral control (PBC) captures the firm’s perceived capacity to comply, influenced by resource
availability, system adequacy, and regulatory clarity. These three constructs jointly influence the firm’s intention
to comply, which leads to actual compliance behavior. The model situates the legal framework as a structural
mediator linking managerial perceptions (as agents) to organizational behavior (as the firm).

The framework provides a basis for future empirical testing using SME-level data and contributes to extending
TPB beyond individual agency to collective decision-making within legally recognized entities.

Limitations and Future Research

This review is conceptual in nature and therefore limited by the absence of empirical testing. While it establishes
the theoretical and legal foundations for applying TPB to firms, future research should validate these
propositions through systematic data collection. One limitation concerns the operationalization of firm-level
constructs, as managerial attitudes may not fully capture the collective orientation of an organization.
Additionally, contextual differences across industries and jurisdictions may influence how subjective norms and
perceived behavioral control are expressed.

Future research should employ mixed-methods approaches combining qualitative interviews with quantitative
surveys to capture both perceptual and institutional dimensions of compliance. Structural equation modeling
(SEM) can test construct relationships, while case studies could illuminate variations in compliance practices
among SMEs of different sizes and sectors. Researchers could also integrate longitudinal data to explore how
regulatory reforms and digital transformation affect compliance behavior over time. Finally, challenges such as
data accessibility, response bias, and identifying the correct organizational representative must be addressed to
ensure validity and reliability.

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These directions would advance empirical understanding of how TPB operates within firms and inform the
development of behaviorally grounded compliance policies.

CONCLUSION

This study set out to examine whether the Theory of Planned Behavior (TPB) can be validly applied at the firm
level to analyze tax compliance among SMEs. The review confirms that TPB offers both conceptual and practical
value when adapted to organizational contexts. Importantly, the study contributes not only to SME tax
compliance literature but also to the advancement of TPB itself. By applying the framework to firms, which act
through legally empowered representatives, it demonstrates the theory’s adaptability beyond individual agency
and clarifies how its constructs can be mapped to collective decision-making.

The first contribution is theoretical. Theoretically, the study demonstrates that TPB extends from the individual
to the organizational level. Attitudes can be interpreted as corporate values and managerial orientations toward
taxation. Subjective norms may reflect institutional and stakeholder expectations. Perceived behavioral control
can represent the firm’s resource sufficiency, system capacity, and regulatory clarity. This alignment strengthens
TPB’s explanatory scope by operationalizing constructs in a legally and institutionally grounded way.

The second contribution is practical. For policymakers, interventions that encourage positive tax attitudes,
simplify regulatory procedures, and enhance perceived control through training, digital tools, and transparent
enforcement are likely to improve compliance outcomes. For SMEs, investments in accounting practices, system
integration, and leadership alignment can reinforce compliance-oriented values and increase confidence in
managing tax obligations.

Beyond general policy recommendations, each construct within the Theory of Planned Behavior offers specific,
actionable implications. For attitudes, government agencies such as RMCD and LHDN can implement targeted
education programs that emphasize the social and economic value of compliance, thereby strengthening positive
tax morale among SME leaders. For subjective norms, policymakers could collaborate with business associations,
chambers of commerce, and digital influencers to promote peer benchmarking and public recognition of
compliant firms, reinforcing compliance as a shared social norm. For perceived behavioral control,
simplification of tax filing procedures through digital tools like MyTax and the provision of online advisory
support would directly increase SMEs’ confidence and capacity to comply. Collectively, these interventions
operationalize TPB constructs into concrete strategies for improving SME compliance at both institutional and
behavioral levels.

The third contribution addresses the research gap in applying TPB to firms. By linking constructs to the
Malaysian legal framework, this study identifies the natural persons such as directors, managers, and officers
through whom compliance intentions are expressed and acted upon. It also outlines methodological directions,
including the need to triangulate self-reported survey data with observable indicators such as filing timeliness
and audit results, and the importance of distinguishing institutional norms from interpersonal pressures.

In conclusion, the theoretical, legal, and empirical foundations jointly support the proposition that TPB is
suitable for investigating SME tax compliance behavior at the firm level. The proposed framework provides a
coherent path for future empirical testing, contributing both to the refinement of TPB and to the design of
targeted compliance strategies. Although the study is grounded in the Malaysian context, its implications extend
internationally. By focusing on the legal and institutional mechanisms through which firms act, the framework
offers a transferable model that can be applied across different jurisdictions, enhancing both its academic
significance and practical relevance for improving SME tax compliance globally.

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