Tax Compliance Research Articles

Regulatory changes and their Impact on Tax compliance: An overview of Finance Act 2023

The aim of this study is to evaluate and review the regulatory changes and their impact on tax compliance, it is an anthology of the existing literature on finance Act and tax compliance with a view to identifying the gaps to which future literature may be directed within the Nigerian context. The paper discusses the concept of finance Act and its surrounding issues on tax compliance as appraised by different authors. The data used for the study were mainly secondary data from different sources. The researchers critically review related literatures from various secondary sources with a particular emphasis on Finance Act 2023, as well as other Nigerian tax legislations. The secondary sources were complemented by the personal observation of Nigerian tax system in Nigeria by the researchers. The study revealed mixed findings on the extent to which finance Act and other financial regulations impact on the economy. The study also concludes that, the factors determining financial regulations are not fixed, and vary from one jurisdiction to another. The study therefore recommends that, from the theories that relates to financial regulations, there shall be a unified theory that amalgamates the existing theories; and that which will be amenable to the ever-changing reporting environment.

Effectiveness of Implementing Single Identity Number (SIN) Through NIK Becomes NPWP for Tax Compliance

The inadequate and ineffective tax administration system in Indonesia has a negative impact on taxpayer compliance in carrying out their tax obligations, such as the tax reporting process is often complicated and time-consuming, thus burdening taxpayers, especially those who run small or medium businesses. The implementation of the Single Identity Number (SIN) through the Population Identification Number (NIK) to the Taxpayer Identification Number (NPWP) in Indonesia starting on January 1, 2024, is a major step in efforts to improve tax compliance. This study was conducted to evaluate the impact of the implementation of SIN through NIK to NPWP on tax compliance as tax administration in Indonesia. This study uses a literature study approach which is a combination of previous research by collecting data from various sources such as scientific journals, news articles, and government regulations which will then find enormous potential in expanding the tax base in increasing taxpayer compliance to carry out tax obligations through the SIN system. The results obtained from this study indicate that the implementation of SIN through NIK to NPWP has a positive impact on increasing tax compliance in Indonesia, such as more effective and easier tax administration with the simplification of tax administration and increased tax revenue. However, despite having various positive impacts, there are several challenges that need to be considered to maximize the effectiveness of the integration, such as the need for socialization and education to the community throughout Indonesia, the need for readiness in terms of information technology infrastructure to support the integration in a sustainable manner, and the need for certainty of good protection of taxpayers' personal data. So, it can be concluded that implementing the integration of NIK and NPWP through the SIN system can have impressive results in improving tax compliance in Indonesia.

The Effect of Turnover and E-SPTPD Services on Restaurant Taxpayer Compliance with Taxpayer Awareness as a Moderating Variable (Case Study on Restaurant Taxpayers in Sidoarjo Regency)

The Covid-19 pandemic that has occurred over the past four years has had an impact on several aspects, one of which is tax revenue. More specifically, restaurant tax revenue in Sidoarjo Regency also decreased during the period 2020 to 2022. This study examines the influence of turnover, and e-SPTPD services, on the level of taxpayer compliance with tax awareness as a moderation variable. The data used in this study is primary data through the purposive sampling method on certain criteria. The research population is restaurant taxpayers in Sidoarjo Regency. Data collection uses a questionnaire that is distributed door-to-door to the respondents. Based on the results of the path coefficient test, the results of the hypothesis test, namely turnover, and e-SPTPD services have a positive effect on taxpayer compliance. Meanwhile, tax awareness cannot strengthen the influence of turnover, as well as e-SPTPD services on taxpayer compliance. This research can be an evaluation of government policies on tax compliance which has implications for optimizing tax revenue, especially in restaurant businesses in Sidoarjo Regency. Namely by considering turnover, and e-SPTPD services.

Tax System Optimization: A Comparative Analysis Between Personal Income Tax and Corporate Income Tax in Indonesia

This study adopts a qualitative approach to analyze the comparison between Personal Income Tax (PPh) and Corporate Income Tax (PPh Corporate) in Indonesia. Through literature studies and observations, this study explores the tariff structure, tax relief, and tax compliance level of the two tax systems. The economic implications of the implementation of Income Tax and Corporate Income Tax on economic growth, investment, and income distribution were also discussed. The findings show that tax reform, as stated in the Law on Harmonization of Tax Regulations (UU HPP), has a significant impact in improving the effectiveness and fairness of the tax system. The results of this study provide in-depth insights into the importance of appropriate tax policies to support inclusive and sustainable economic growth in Indonesia.

Residential income tax compliance in Nepal: An empirical analysis

Tax compliance is the determining factor in tax report submission, enhancing tax awareness. A low level of tax compliance (TC) directly affects the government revenue and low inflow of information regarding taxpayers. This study uses descriptive and explanatory research approaches to identify determinants of residential rental income tax compliances (TC) among property owners in Kathmandu Metropolitan City, Nepal. A total of 1,129 structured questionnaires were distributed among the households of Kathmandu Valley for the cross-sectional and primary data, and only 500 (44.29 percent) useful responses were received from the respondents as the population was unknown. The response rate exceeds the estimated sample size of 384. The findings revealed a significant positive impact of tax rate on tax compliances (r = 0.329**, P<0.05). Fines and penalty (FP) and tax compliance (TC) found a positive and significant association depicting (r =.398**, P<0.05). Similarly, there was a positive and significant relationship (r = .612**, P<0.05) between attitudes and perception (AP) and tax compliance (TC). Moreover, a positive and significant association was found (r =.410**, P<0.05) between tax knowledge (TK) and tax compliance (TC). Furthermore, tax policy (TP) was positively and significantly associated (r = .440**, P<0.05) with tax compliance (TC). This study enhances taxpayers’ knowledge and helps to execute the policies to increase the efficiency and transparency of the tax system in Nepal. Acknowledgment The authors would like to express their gratitude to Prof. Dr. Achyut Gnawali and Mr. Prem Bahadur Budhathoki, Associate Professor, and Dr. Gangaram Bishowakarma, Assistant Professor of Tribhuvan University, Kathmandu, Nepal, for extending warm support towards the research work through the academic inputs.

Pengaruh Pengetahuan Wajib Pajak, Tarif Pajak, Kesadaran Perpajakan, dan Sanksi Perpajakan Terhadap Kepatuhan Perpajakan pada Pelaku Usaha di Kabupaten Bekasi Periode 2011-2019

This research aims to analyze and explain how much influence taxpayer knowledge, tax rates, tax awareness and tax sanctions have on tax compliance among business actors in Bekasi district for the 2011-2019 period partially and simultaneously. The research method used in this research is a quantitative verification approach. The population used in this research is Business Taxpayers in Bekasi Regency. With a sample of 100 samples. The data analysis used is multiple linear regression analysis with partial and simultaneous hypothesis testing. The research results show that taxpayer knowledge has a positive and significant effect on taxpayer compliance. This shows that the higher the knowledge a taxpayer has, the higher the taxpayer's compliance in paying taxes. Taxpayer awareness has a positive and significant effect on taxpayer compliance. This means that the level of awareness regarding compliance in paying taxes is still low. Tax sanctions have no effect on taxpayer compliance. This explains that the existence of sanctions does not make taxpayers obedient in paying their taxes.

The impact of asset specificity on corporate tax avoidance: Do financial constraints and product market power matter?

Our findings reveal that asset specificity significantly enhances corporate tax avoidance, with firms exhibiting lower cash effective tax rates. Firms with higher asset specificity also engage in more aggressive tax avoidance strategies, including tax dodging and long-term tax planning. Additionally, our analysis indicates that the positive impact of asset specificity on tax avoidance is less pronounced in firms with lower ESG performance but is more pronounced in those facing negative demand shocks or operating during periods of economic policy uncertainty. We also find that financial constraints and product market power mediate the relationship between asset specificity and tax avoidance, with financial constraints serving as the dominant economic channel. These findings offer new insights into the factors driving corporate tax avoidance and highlight the complex interplay between asset specificity, financial constraints, product market power, and tax planning strategies.

The Effect of Law Number 7 of 2021 on Harmonization of Tax Regulations on Fiscal Justice in Indonesia

Law No. 7 of 2021 on Harmonisation of Tax Regulations is a landmark reform in Indonesia aimed at enhancing tax compliance, promoting fiscal justice, and aligning the country’s tax framework with international standards. This study provides a jurisdictional analysis of the law, examining its key provisions, impact on tax compliance, revenue collection, and socio-economic implications. The results show that the law has significantly broadened the tax base, improved tax transparency, and introduced progressive measures to promote equity, including a carbon tax and revised income tax brackets. However, challenges remain in ensuring that the benefits are distributed equitably across all income groups and sectors. The study concludes that while Law No. 7 of 2021 represents a significant step toward achieving fiscal justice, further refinement and support for smaller enterprises are required to fully realize its potential.

The Effect of Women’s Role on Board, ESG Performance, and Tax Avoidance

This research examines the impact of board gender diversity on tax avoidance, with ESG performance as an intervening variable. Using 87 non-financial companies listed on the Indonesia Stock Exchange (IDX) with ESG scores from Thomson-Reuters ASSET4 during the 2017-2019 period, the study reveals that board gender diversity significantly influences tax avoidance, indicating that diversity does not improve tax compliance. The male-dominated boards in Indonesia limit the effectiveness of monitoring corporate activities, including tax avoidance. Additionally, gender diversity negatively affects ESG performance, suggesting that the small number of women on boards diminishes efforts to enhance sustainability. ESG performance does not mediate the relationship between gender diversity and tax avoidance, though it can reduce tax avoidance when transparency in ESG reporting is increased. Limitations include a small sample size and data restricted to the 2017-2019. Future studies could explore alternative tax avoidance measures and other corporate governance factors.

Analisis model kebijakan program penyaluran “KUR” dalam rangka meningkatkan perilaku kepatuhan wajib pajak pelaku “UMKM”

The Micro, Small, and Medium Enterprises (MSMEs) sector has long been a significant driver of Indonesia's economy, drawing considerable attention from the government. According to the National Medium-Term Development Plan (RPJMN), various strategic measures have been implemented to promote the growth and resilience of MSMEs as a means to enhance national economic independence. However, despite their substantial economic contribution, MSMEs' tax compliance remains low, as reflected in their minimal contribution to tax revenue. The small contribution is an indication that the level of compliance of MSMEs actors in fulfilling their tax obligations is still very low. This research was conducted using a qualitative approach and began by analyzing and evaluating the policy of the People's Business Credit (KUR) distribution program in relation to tax aspects. The analysis and evaluation were based on data sourced from literature studies and interviews with relevant resource persons from the point of view of technical feasibility, economic and financial possibility, political viability, and administrative operability. The results show that the existing policy has not fully accommodated taxation aspects. This is unfortunate considering that the KUR interest subsidy provided by the government to MSMEs actors is financed by the State Budget (APBN), which is mostly sourced from taxes. Furthermore, the study proposes policy model to encourage the development of the MSMEs actors.

Trust in Government and Tax Compliance in Indonesia and Malaysia: Do Ethics and Tax Amnesty Matter?

This study examines the moderating role of tax amnesty and the mediating role of ethics in the relationship between trust in government and tax compliance among taxpayers in Indonesia and Malaysia. The data were analysed using the structural equation modeling to examine the mediating role of ethics and hierarchical regression analysis to test the moderating role of tax amnesty in the relationship between trust and tax compliance. Based on the sample collection using the purposive sampling method, the study included 529 respondents from Indonesia and 137 from Malaysia. The findings reveal that the relationship between trust in government and taxpayer compliance is statistically significant with ethics as full mediator in Indonesia. However, the relationship between trust in government and tax compliance is not statistically significant in Malaysia. Ethics has a direct effect on tax compliance in both countries. Tax amnesty does not show a moderating effect in the relationship between trust in government and tax compliance. However, it plays a negative predictive role for tax compliance in Indonesia. This study will assist the government in developing tax compliance strategies to increase tax revenue with the launch of a similar program without neglecting the honest taxpayer.

Building a Culture of Compliance: The Influence of Tax Socialization and Inclusion on Indonesian Micro, Small, and Medium Enterprises (MSMEs) Taxpayers

Taxes serve as the cornerstone of any nation's economic framework, functioning as both a regulatory mechanism and a primary source of government revenue. They are indispensable for managing taxpayer behavior, ensuring a steady stream of state income, and financing essential public services and infrastructure development. In Indonesia, the compliance of micro, small, and medium enterprises (MSMEs) is pivotal to the nation's fiscal well-being. This study delves into the factors that influence MSME taxpayer compliance, specifically focusing on the role of tax socialization, tax inclusion, and the involvement of tax volunteers. A quantitative research approach was adopted, involving the distribution of questionnaires to MSME taxpayers in Indonesia. The data collected was then analyzed using SPSS software to test the hypotheses regarding the impact of tax socialization, tax inclusion, and tax volunteers on taxpayer compliance. The findings of this study reveal that tax socialization and tax inclusion positively influence the level of tax compliance among Indonesian MSME taxpayers. Furthermore, the involvement of tax volunteers also has a positive impact on enhancing taxpayer compliance. This study underscores the importance of tax socialization and tax inclusion in fostering a culture of compliance among MSMEs in Indonesia. The positive role of tax volunteers in assisting taxpayers and promoting compliance is also highlighted. These findings have significant implications for tax authorities in their efforts to improve tax compliance rates and enhance revenue collection.

Analysis of the Role of Tax Consultants in Improving Taxpayer Compliance (Case Study at SHC Manado Tax Consultant Office)

The role of tax consultants is instrumental especially in improving taxpayer compliance, especially in the midst of increasingly complex tax regulations. Tax consultants can increase taxpayer awareness of the importance of voluntary tax compliance, which ultimately contributes to increasing state revenue and economic stability. This research aims to analyze the role of tax consultants in improving taxpayer compliance. The method of analysis used in this thesis research is a descriptive method whose purpose is that each data is collected and then analyzed and then a conclusion is drawn and the type of research used is a qualitative descriptive approach. The results showed that the role of tax consultants is very important in helping taxpayers fulfill their tax obligations. Tax consultants play several key roles in assisting taxpayers to improve taxpayer compliance.

Implementation of Artificial Neural Networks as a Method for Early Detection of Tax Evasion Behavior in Indonesia

Research Aims: This study aims to analyze the ability of the Artificial Neural Network (ANN) model in early detection of tax evasion behavior in Indonesia. Design/methodology/approach: This study uses a qualitative method with a descriptive approach, the types of data used in this study are primary data and secondary data. Primary data is obtained from the results of interviews to obtain the information needed by the researcher. The interview informants came from the DGT sub-Directorate of Potential, Compliance and Tax Revenue with the initials K&H, tax consultants and taxpayers. while secondary data is collected through the DGT online website and through articles and journals on Artificial Intelligence (AI), Artificial Neural Networks (ANN), tax evasion, and financial information data on income, expenses, amount of assets, taxes payable) and behavioral indicators (tax compliance history, frequency of late reporting, significant changes in financial statements). The data analysis technique used is descriptive analysis, namely data collection, data reduction, data presentation and conclusion drawing Research Findings: The results of this study show that the use of a neural network model can be an effective tool to detect symptoms of tax evasion behavior early. This method allows tax authorities to monitor and identify suspicious activity more efficiently and effectively. Theoretical Contribution/Originality: This study makes a significant theoretical contribution by integrating the use of Artificial Neural Networks (ANN) in detecting tax evasion in Indonesia. The originality of this research lies in the application of ANN in the context of Indonesia's tax system, where the use of advanced technology such as ANN is still relatively new. The study also combines the pentagon's fraud theory, which adds elements of arrogance and competence in the analysis of tax evasion behavior, with a machine learning approach, creating a more holistic and innovative framework

Pengaruh Kepatuhan Pajak, Kualitas Pelayanan Pajak dan Biaya Sanksi Kepatuhan Pajak terhadap Penerimaan Pajak Kendaraan Bermotor dengan Tax Amnesty sebagai Variabel Moderasi pada UPT Badan Pendapatan Daerah Wilayah Kabupaten Kupang

This research aims to determine the effect of tax compliance, tax service quality and tax compliance sanction costs on motor vehicle tax revenues with tax amnesty as a moderating variable at the Kupang Regency Regional Revenue Agency UPT. This research involved conducting a quantitative survey. The sample used as the main data source was 100 Kupang Regency taxpayers. Inferential statistical analysis is a type of data analysis method used in this research. The results of this research statistically found that taxpayer compliance does not have a significant influence on motor vehicle tax revenue. However, the quality of tax services and sanction fees have a positive and significant influence on motor vehicle tax revenues in the UPT activities of the Kupang Regency Regional Revenue Agency. Meanwhile, the tax amnesty variable as a moderating variable has an influence on motor vehicle tax revenues, but the tax amnesty variable is unable to moderate the influence of taxpayer compliance and compliance sanctions costs on motor vehicle tax revenues. The tax amnesty variable is only able to moderate the influence of service quality on motor vehicle tax revenues in the UPT activities of the Kupang Regency Regional Revenue Agency

Making Tax Smart: Feasibility of Distributed Ledger Technology for Building Tax Compliance Functionality to Central Bank Digital Currency

The latest advancements in distributed ledger technology (DLT) and payment architectures such as the UK’s New Payments Architecture present opportunities for leveraging the hidden informational value and intelligence within payments. In this paper, we present Smart Money, an infrastructure capability for a central bank digital currency (CBDC) which enables real-time value-added tax split payments, oversight, controlled access, and smart policy implementation. This capability is implemented as a prototype called Making Tax Smart (MTS), which utilises the open-source R3 Corda DLT framework. The results presented herein confirm that it is feasible to build an MTS capability which is scalable and co-exists with the current payment systems. Smart Money CBDC has the potential to mobilise payments data, transforming the role of money from a blunt instrument to a government policy sensor and actuator without disrupting the existing money system. DLT, smart contracts, and programmable money have a crucial role to play with benefits for government departments, the economy, and society as a whole.

Determinants of Tax Avoidance Intentions in Tourism SMEs: The Mediating Role of Coercive Power, Digital Transformation, and the Moderating Effect of CSR

Tax compliance and avoidance are critical issues for governments and businesses worldwide, especially as businesses often use legal methods to minimize taxes, which can impact public revenue and equity within the tax system. This study focuses on understanding the factors influencing tax avoidance behaviors among SMEs in Greece’s tourism sector, a sector that has received limited research attention. To this end, a quantitative cross-sectional design was employed, using a structured questionnaire to explore potential factors influencing tax avoidance behavior. Data were collected from 534 SME managers and analyzed using Structural Equation Modeling (SEM) to assess the impact of key factors and their interrelationships, including coercive power, digital transformation, tax knowledge, firm performance, and perceived fairness, on tax avoidance. In addition, corporate social responsibility (CSR) was included as a moderator variable, while coercive power and digital transformation were assessed as mediators. Furthermore, Multi-Group Analysis (MGA) was conducted to explore the differences between small and medium enterprises, as well as different ownership structures. The results indicate that all key determinants, except perceived fairness, are significantly and positively related to tax avoidance intention. Additionally, it was revealed that coercive power increases tax avoidance through firm performance and tax knowledge, while digital transformation mediates the influence of firm performance on tax avoidance by curtailing avoidance intentions. While CSR mitigates the negative influence of coercive power, digital transformation has a dual role: that of promoting transparency and strategic efforts to reduce the tax burden. These findings have important policy implications, as policymakers seek to promote digital adoption and enhance CSR engagement while formulating specific regulatory strategies to reduce tax avoidance among SMEs.

Optimizing provincial tax compliance: Implementing good corporate governance pillars

Tax revenue in the province is still low, even though the central government has handed over the tax base to the regions for more than 20 years. The concept of GCG can improve performance and tax revenue in the regions. This study examines the relationship of each pillar of Good Corporate Governance (GCG) to tax compliance and determines the types of GCG pillars that can be prioritized for implementation in a local government agency. This study uses the regional financial management transparency index (ITPAD) as an indicator of the transparency pillar, the fiscal independence index (IKF) as an indicator of the independence pillar, and financial statement audit opinion for the accountability and responsibility pillars. Finally, the Gini ratio is an indicator of fairness. The research sample was taken from all 34 provinces in Indonesia. Secondary data is sourced from publications, books, web pages, and previous research from 2016 to 2020. This period was chosen to exclude data from the COVID-19 pandemic era in Indonesia. The analysis method is panel data multiple linear regression with a random effect model. The results showed that fiscal independence and transparency of a region's budget management positively influence public tax compliance in a provincial area in Indonesia, while the opinion of financial statements and the Gini ratio have no influence. This study implies that to improve public tax compliance in a provincial area in Indonesia, and local governments can prioritize the implementation of the transparency and independence pillars achieved by increasing the ITPAD and IKF scores in their regions. The Ministry of Home Affairs can also encourage regions to enhance transparency and independence by improving ITPAD and IKF so that tax revenue in the regions can increase.

Probability of Detection and Value Added Tax Compliance among Small and Medium Enterprises in Westlands Sub County, Nairobi, Kenya: Moderating Effect of Tax Service Quality

Purpose: Value-added tax compliance has remained a challenge, especially when it comes to SMEs operating in Kenya. The high level of informality of this sector provides an incentive for most of the SMEs to evade payment of VAT, a situation that has constrained the amount of tax revenues available to finance fiscal budget. This study aimed to determine the moderating role of tax service quality on the relationship between probability of detection and value added tax compliance among small and medium enterprises in Westlands Sub County, Nairobi, Kenya. Methodology: The study adopted an explanatory design targeting 751 SMEs operating in Westlands Sub- County, Nairobi, Kenya as registered by Nairobi City County. The sample frame was the list of SMEs in Westlands Sub- County that is available in Nairobi City County. The sample size was 261 owners of the said SMEs who were stratified into four categories based on the nature of undertaking of their business and a representative sample from each of these categories was drawn. Gathering of information was by use of a questionnaire. To analyze the collected information, descriptive statistics like means and standard deviations as well as multiple regression analysis was adopted. Results: Regression of coefficients showed that probability of detection had a positive and significant effect on VAT compliance of SMEs (β=0.358, p=0.000). The findings also revealed that tax service quality moderates the relationship between probability of detection and value added tax compliance among small and medium enterprises (β= 0.086, ρ<0.05). Conclusion: The study concluded that probability of detection had a positive and significant effect on VAT compliance of SMEs. In addition, the study concluded that tax service quality moderate the relationship between probability of detection, on value added tax compliance among small and medium enterprises in Westlands Sub County, Nairobi, Kenya. KRA should increase the rate probability of audit detection by coming up with new mechanisms of audit detection thus enhancing VAT compliance of VAT amongst the SMEs. The government should strive to provide SME owners in Westlands Sub County, Nairobi, with services that are of high standards for example at the tax stations as clearly stated in the corporate plan to reduce the need for spending costs to hire skilled persons such as tax consultants.

Effect of Tax Morale on Value Added Tax Compliance Among Medium Taxpayers in North of Nairobi Tax District, Kenya

Purpose: Tax compliance is important as it has a direct impact on revenue for most governments around the world. Despite the reforms that the Kenya Revenue Authority has been undertaking to increase revenue collection, it has of late failed to meet its revenue targets, particularly VAT targets. There has also been existence of fluctuations in VAT collection over the past couple of financial years. The objective of the study is to showcase the effect of tax morale on Value Added Tax compliance among medium taxpayers in north Nairobi tax district, Kenya. The study has been guided by the ability to pay theory. Methodology: The study adopted the explanatory research design and primary data was collected using structured questionnaires with closed-ended questions. The total target population was 2,376 VAT-registered medium taxpayers in north of Nairobi tax district, Kenya and the sample size was 342 respondents. Out of the 342 respondents targeted, 274 questionnaires were correctly filled and returned, indicating 80% response rate. Results: The study also found that tax morale had a positive and significant effect on Value Added Tax compliance β=0.173 p-value =0. 016. Conclusion: The study recommends that the government of Kenya should allocate resources towards improving taxpayer services, including helplines, online portals, and advisory services.