Analysis of Tax Compliance Levels for Regional Taxes in the Provinces of Indonesia

Nella Ervina (), Junaidi Junaidi (), Zulgani Zulgani and Erni Achmad
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Nella Ervina: Doctoral Program in Economics, Faculty of Economics and Business, Universitas Jambi, Jambi 36361, Indonesia
Junaidi Junaidi: Doctoral Program in Economics, Faculty of Economics and Business, Universitas Jambi, Jambi 36361, Indonesia
Zulgani Zulgani: Doctoral Program in Economics, Faculty of Economics and Business, Universitas Jambi, Jambi 36361, Indonesia
Erni Achmad: Doctoral Program in Economics, Faculty of Economics and Business, Universitas Jambi, Jambi 36361, Indonesia

Economies, 2025, vol. 13, issue 12, 1-19

Abstract: This study examines how socialization costs, inspection costs, collection costs, motor vehicle tax rates (Pajak Kendaraan Bermotor, PKB), vehicle ownership transfer tax rates (Bea Balik Nama Kendaraan Bermotor, BBNKB), the Corruption Perception Index (CPI), and the Indonesian Digital Society Index (Indeks Masyarakat Digital Indonesia, IMDI) influence regional tax compliance across 34 provinces in Indonesia, using secondary data from 2020 to 2024. Guided by Fiscal Federalism, Tax Optimization Theory, and the Fischer Tax Compliance Model, the analysis integrates spatial regression and SWOT to capture both structural and spatial dynamics in provincial tax administration. The spatial error model reveals that socialization costs, PKB, and BBNKB significantly shape provincial tax compliance. At the same time, the other variables show no measurable effect. Spatial clustering indicates High–High compliance in Central Java, Low–Low compliance in South Sumatra and Lampung, and Low–High compliance in North Sumatra. The SWOT assessment places Indonesia’s provincial tax compliance strategy in Quadrant I, suggesting strong institutional capacity and substantial external opportunities to support aggressive improvement strategies. This study contributes by providing province-wide empirical evidence on the fiscal and administrative determinants of compliance and by incorporating collection costs and spatial relationships into the analysis. Policy implications include strengthening targeted socialization, improving rate-setting mechanisms, and expanding digital reporting systems to enhance taxpayer understanding and administrative transparency.

Keywords: socialization costs; inspection costs; collection costs; tax rates; anti-corruption perception index; Indonesian digital society index; and tax compliance (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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