Abstract
The implementation of electronic tax filing provides convenience to taxpayers in reporting their annual tax returns. The adoption of this policy, especially for micro, small and medium enterprises, is illustrated through the number of MSME taxpayers who report Electronic Annual Tax Return to the number of MSMEs registered as taxpayers. Increases have not followed annual increases in the number of MSME taxpayers who report Annual Tax Return. We investigated the possible correlation between business size and formal tax compliance use: data from the Directorate General of Taxes at the province level in Indonesia for 2014 – 2018. We employed the aggregate business-level Micro, Small, and Medium electronic tax filing data combined with the Base Transceiver Station data at the provincial level. We found that micro and small-scale taxpayers e – filing rate has a positive and significant effect on formal tax compliance. Yet, both of them have a non-linear relationship to formal tax compliance. These results imply that size or business scale MSME taxpayers is associated with formal tax compliance, and greater benefits can be obtained in a province with a high microscale taxpayer's e – filing rate.
Highlights
Tax compliance is one of the most important problems faced by all countries in the world
Data from the Directorate General of Taxes of the Republic of Indonesia exhibits that the formal tax compliance of MSME taxpayers continues declining every year from 55% in 2014 to 38% in 2017
By analyzing Indonesia's formal tax compliance, this research is the first to employ the aggregate data of Electronic Annual Tax Returns reporting by MSME taxpayers in every province has been applied to examine the interrelationship between business size on formal tax compliance
Summary
Tax compliance is one of the most important problems faced by all countries in the world. By analyzing Indonesia's formal tax compliance, this research is the first to employ the aggregate data of Electronic Annual Tax Returns reporting by MSME taxpayers in every province has been applied to examine the interrelationship between business size on formal tax compliance. The law wholly and freely, or the degree to which a kelurahan with BTS in each province throughout taxpayer complies or fails to comply with the tax Indonesia because the e-filing rate of a province is rules of their country In Indonesia's context, individual taxpayers information technology infrastructure It is or corporate taxpayers are deemed obedient if they important to know the relationship between the are registered to have a Taxpayer Identification information technology infrastructure base and the Number, report tax returns, accomplish all tax e-filing rate to measure the taxpayer's formal obligations, and collect and withhold taxes as compliance behavior in utilizing e-filing. Literature Review obligations based on formal taxation provisions (Guztaman, 2020)
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