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Trust Reciprocity and Power: An Integration to Create Tax Compliance

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  • Supramono Supramono
  • Theresia Woro Damayanti

Abstract

Previous studies have used the slippery slope framework that integrates trust and perception on tax authorities’ power as a tax compliance mode in several countries. This research aims to show and to develop slippery slope framework in Indonesia by adding the test of trust reciprocity. We use a 3 x 2 factorial inter-subject experiment study that involves 324 students as our participants. Our results show that trust, perception on tax authorities’ power and the interaction of both variables affect tax compliance. More interestingly, taxpayers exhibit the highest tax compliance when they have trust reciprocity. In this case, perception on tax authorities’ power is no longer significant in explaining tax compliance. Thus, mutual trust is very important. Tax authorities must continue to foster an attitude of trust in taxpayers and vice versa as the key to success for the government to increase tax compliance.

Suggested Citation

  • Supramono Supramono & Theresia Woro Damayanti, 2019. "Trust Reciprocity and Power: An Integration to Create Tax Compliance," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(1), pages 131-139.
    • Handle: RePEc:mje:mjejnl:v:15:y:2019:i:1:131-139
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    1. Lars P. Feld & Bruno S. Frey, 2002. "Trust breeds trust: How taxpayers are treated," Economics of Governance, Springer, vol. 3(2), pages 87-99, July.
    2. Katharina Gangl & Stephan Muehlbacher & Manon de Groot & Sjoerd Goslinga & Eva Hofmann & Christoph Kogler & Gerrit Antonides & Erich Kirchler, 2013. ""How can I help you?" Perceived Service Orientation of Tax Authorities and Tax Compliance," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(4), pages 487-510, December.
    3. Benno Torgler & Christoph A. Schaltegger, 2005. "Tax Morale and Fiscal Policy," CREMA Working Paper Series 2005-30, Center for Research in Economics, Management and the Arts (CREMA).
    4. Kogler, Christoph & Batrancea, Larissa & Nichita, Anca & Pantya, Jozsef & Belianin, Alexis & Kirchler, Erich, 2013. "Trust and power as determinants of tax compliance: Testing the assumptions of the slippery slope framework in Austria, Hungary, Romania and Russia," Journal of Economic Psychology, Elsevier, vol. 34(C), pages 169-180.
    5. Hammar, Henrik & Jagers, Sverker C. & Nordblom, Katarina, 2009. "Perceived tax evasion and the importance of trust," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 238-245, March.
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    Cited by:

    1. Indah Masri & Tryas Chasbiandani & Diandra Kamila Rasyid & Nur’Aini Nur’Aini, 2024. "Reciprocal Relationship between Taxpayer’s Compliance and Governance Quality," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 131-137, July.

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