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Factors Affecting Tax Compliance by Small and Medium Enterprises in Indonesia

Author

Listed:
  • Wilsa Road Betterment Sitepu

    (Universiti Utara Malaysia, Sintok, Malaysia)

  • Salwani Arbak

    (Universiti Utara Malaysia, Sintok, Malaysia)

Abstract

Complying with tax laws and regulations that are constantly changing is a challenge. Tax authorities provide clarification and advice and implement innovations such as e-filling to encourage businesses to pay their taxes on time and in full. Taxes lead to the withdrawal of part of the company's income for the benefit of the state. Therefore, many subjective and objective factors influence their payment process. This study aimed to examine factors affecting tax compliance by small and medium enterprises in Indonesia. This study uses quantitative research methodology, specifically survey methods. In distributing questionnaires to 384 respondents, 205 sample questionnaires were declared eligible to continue in this study. The data analysis method is structural equation modelling with partial least squares (SEM-PLS). The results of this study show that tax knowledge and knowledge of e-filling have a positive and significant effect on tax compliance. Instead, tax fairness has a negative and significant impact on tax compliance. However, the effect of the perception of corruption variable on tax compliance is rather insignificant; that is, this factor does not have a negative impact. Perception of corruption as a moderating variable has a slightly negative effect on the relationship between tax knowledge, knowledge of e-filling, tax fairness and tax compliance. The study results help better understand taxpayers' behaviour in their desire to pay taxes per the law. When changing taxation rules or introducing new tax collection methods, the government must consider factors that influence taxpayers' behaviour. The influence of some such factors was investigated in this study. In addition, it is worth fighting corruption in the tax system because it can reduce small and medium-sized enterprises' willingness to follow the law in the field of taxes.

Suggested Citation

  • Wilsa Road Betterment Sitepu & Salwani Arbak, 2023. "Factors Affecting Tax Compliance by Small and Medium Enterprises in Indonesia," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 60-71, December.
    • Handle: RePEc:iaf:journl:y:2023:i:4:p:60-71
    DOI: 10.33146/2307-9878-2023-4(102)-60-71
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    References listed on IDEAS

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    Cited by:

    1. Stevanie & Tony Sudirgo, 2024. "The Effect of Leverage, Liquidity and Firm Size on Tax Aggressiveness," Oblik i finansi, Institute of Accounting and Finance, issue 1, pages 157-163, March.

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    More about this item

    Keywords

    tax knowledge; knowledge of e-filling; tax fairness; perception of corruption; tax compliance;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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