Tax perceived as barrier to innovation

Document Type

Journal Article

Publication Title

International Journal of Recent Technology and Engineering


Blue Eyes Intelligence Engineering & Sciences Publication


School of Business and Law


Ministry of Higher Education of Malaysia

UiTM Melaka


Originally published as: Samad, K. A., Rahman, N. H. A., Roni, S. M., Roseli, N. H. M., & Arham, A. F. (2019). Tax perceived as barrier to innovation. International Journal of Recent Technology and Engineering, 8(2S), 493-497.

Original article available here.


In spurring high level of economic development, tax as one of the fiscal policy instruments is vital in generating more revenues for the government. However, higher tax revenues mean the people and companies have to pay more out of their income thus create austerity in productivity. The present study examines the correlation between tax and newly invented products or services among firms in Malaysia. The study employs binomial logit model by using the World Bank data of 919 firms in 2015. The result shows that the correlation estimate between tax and innovation is weak, but the controlling variables such as residency, firm size and region strengthened the coefficients between the variables. There is a high concentration of residence firms not to invent new product or service when they perceived the tax as obstacle to their current operations. This study also finds a significant role of firm size on this phenomenon whereby small firms are hardly involve in innovation activities as compared to medium firms. The study thereby offers a new insight for policy formulation to consider the innovation activities in future planning.

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