The Impact of Social Identity on Tax Compliance in Indonesia During the Pandemic COVID-19

Abstract

Purpose: This study aims at examining the impacts of manufacture’s social identity on their tax attitudes, and how these effects on firm’s tax compliance, and used a qualitative method Theoretical framework: Two techniques are distinguished in Devos' (2014) Compliance Theory: the Economic Deterrence Approach and the Psychological Approach. Research by Scott & Grasmick (1998) as cited in Trivedi, Shehata & Lynn (2003) examined that even if economic elements are crucial for evaluating compliance behavior, they are insufficient to fully explain the level of compliance. Design/methodology/approach: The sample of the study are 101 respondents. This study uses quantitative methods to collect, process, and analyze data to draw empirical conclusions. Findings: The data from 101 respondents reported that membership and identity affect their firm’s tax compliance, but not private collective self-esteem and public collective self-esteem. The result shows that dependence on the community and stakeholder views on corporate identity are considered important by companies in order to increase public trust. Meanwhile, private and public collective self-esteem is no longer the key. It implies that the former is more likely to have a higher cost of tax collection to represent tax compliance, which may restrict funds for their public sector and adversely affects its functionality. This is consistent with the previous findings that identity socially impacted tax compliance, instead of self-esteem. Research, Practical & Social implications: Research results for manufacturing managers related to strengthening social identity factors in order to improve overall corporate tax compliance, such as joining tax communities, professional memberships, and the like. By having a clear social identity, managers have channels to discuss tax issues and find solutions to tax problems more easily. Originality/value: The tax compliance issues findings related to self esteem approach having new model for DGT’s to optimize tax income strategy during pandemic.