Tax-related compliance is one of the major difficulties facing small and medium enterprises (SMEs) internationally. The importance of SME sectors in Malaysia is largely acknowledged but government consideration of the regulatory burden is often restricted to general business and finance-related issues. Even the role of relevant authorities, particularly the Inland Revenue Board, may be considered substantially low. This paper discusses the SME tax compliance burden, relevant international and Malaysian compliance cost estimates, and challenges for Malaysian SMEs. The paper concludes by indicating the challenges facing the Malaysian government and recommending income tax simplification measures.