EconPapers    
Economics at your fingertips  
 

Determinants of tax attitude in small and medium enterprises: Evidence from Indonesia

Rosalita Rachma Agusti and Aulia Fuad Rahman

Cogent Business & Management, 2023, vol. 10, issue 1, 2160585

Abstract: This study investigates the extent to which tax literacy, power, and trust strengthen tax attitudes in Indonesian micro, small, and medium enterprises. To meet this objective, this study analyzes (1) the effect of tax literacy on trust and power, (2) the effect of trust and power on voluntary compliance and tax avoidance, and (3) the direct and indirect effects of tax literacy on voluntary compliance and tax avoidance through trust and authority. The findings indicate that tax literacy is very important in determining trust and power. Further, trust and tax authority are important to create a synergistic climate that encourages increased voluntary compliance. Despite evidence that trust in tax authorities is likely to reduce tax evasion, the power of tax authorities had no significance in determining tax evasion. In this case, power was present solely because of the tax obligations imposed through tax regulations rather than legitimacy. Additionally, this study found that trust in authority and the power of authority mediate the relationship between tax literacy and voluntary compliance. Hence, it demonstrates that voluntary compliance depends on whether or not trust and power create legitimacy in the view of taxpayers. A stronger perception of trust and power can ultimately increase tax compliance. For SMEs, the role of tax literacy is crucial, as it helps SMEs understand the facilities provided by the government in the form of tax privileges or facilities. This research uncovered the importance of tax knowledge and its benefits for SMEs in terms of understanding their situation regarding tax. Further, SMEs would be better placed to understand the privileges provided by the government if tax administration principles were simplified.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/23311975.2022.2160585 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:oabmxx:v:10:y:2023:i:1:p:2160585

Ordering information: This journal article can be ordered from
http://cogentoa.tandfonline.com/journal/OABM20

DOI: 10.1080/23311975.2022.2160585

Access Statistics for this article

Cogent Business & Management is currently edited by Len Tiu Wright and Tahir Nisar

More articles in Cogent Business & Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2025-03-20
Handle: RePEc:taf:oabmxx:v:10:y:2023:i:1:p:2160585