THE ROLE OF TAX FAIRNESS AND TAXPAYER TRUST IN BUILDING VOLUNTARY COMPLIANCE IN MSME TAXPAYERS
Abstract
The aim of this study is to explain the role of tax fairness (procedural and distributive) and taxpayer trust (cognitive) in building voluntary compliance of micro, small, and medium enterprises (MSMEs) taxpayers in Malang Raya, Indonesia. To achieve this, the study uses a positivist paradigm approach with a judgment sampling method. Data were collected from questionnaires, which were created using the Google Forms platform and distributed online. Furthermore, the response was obtained from 204 respondents. The study results show that the two observed factors, i.e tax fairness (procedural and distributive) and taxpayer trust (cognitive), significantly influences voluntary compliance among MSME taxpayers in Malang Raya, Indonesia.
References
Albab, F. N. U., & Suwardi, E. (2021). The Effect of Tax Knowledge on Voluntary Tax Compliance with Trust as a Mediating Variable: A study on micro, small, and medium enterprises (MSMEs). The Indonesian Journal of Accounting Research, 24(3), 381-406. https://doi.org/10.33312/ijar.528
https://doi.org/10.33312/ijar.528
Angeles, I. T. (2021). Categorizing taxpayers: A mixed-method study on small business tax compliance in the Philippines. The South East Asian Journal of Management, 15(2), 212-234. http://www.ijil.ui.ac.id/index.php/tseajm/article/viewFile/13295/67546965
https://doi.org/10.21002/seam.v15i2.13295
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. https://doi.org/10.1037//0022-3514.51.6.1173
https://doi.org/10.1037//0022-3514.51.6.1173
Catriana, E. (2021, September). Menkop: kontribusi pajak UMKM masih sangat rendah (minister of cooperatives and SMEs: The MSME tax contribution is still low). Kompas.Com. https://money.kompas.com/read/2021/09/16/191249026/menkop-kontribusi-pajak-umkm-masih-sangat-rendah
Chin, W. W. (1995). Partial least squares is to LISREL as principal components. Technology Studies, 2(2), 315-319.
Colquitt, J. A., LePine, J. A., Piccolo, R. F., Zapata, C. P., & Rich, B. L. (2012). Explaining the justice-performance relationship: Trust as exchange deepener or trust as uncertainty reducer?. Journal of Applied Psychology, 1-15. https://doi.org/10.1037/a0025208
https://doi.org/10.1037/a0025208
Darmayasa, I. N., Sudarma, I. M., Achsin, H. M., & Mulawarman, A. D. (2018). Constructed interpretation of tax compliance through the historicity, rationality, and actuality of Pancasila (cases in Indonesia). International Journal of Trade and Global Markets, 11(1-2). https://www.inderscienceonline.com/doi/pdf/10.1504/IJTGM.2018.092481
https://doi.org/10.1504/IJTGM.2018.092481
DDTC News. (2020, May). Pemerintah Proyeksi Tax Ratio 2020 Terendah dalam 2 Dekade Terakhir (Government Projects Lowest Tax Ratio 2020 in the Last 2 Decades). https://news.ddtc.co.id/pemerintah-proyeksi-tax-ratio-2020-terendah-dalam-2-dekade-terakhir-20876?page_y=1774
Ensari, M. Ş., & Karabay, M. E. (2014). What helps to make SMEs successful in global markets?. Procedia - Social and Behavioral Sciences, 150, 192 - 201. https://doi.org/doi: 10.1016/j.sbspro.2014.09.030
https://doi.org/10.1016/j.sbspro.2014.09.030
Erin. (2021). The effectiveness of tax administration digitalization to reduce compliance cost taxpayers of micro small, and medium enterprises. Budapest International Research and Critics Institute-Journal, 4(4), 7508-7515. https://doi.org/https://doi.org/10.33258/birci.v4i4.2666
Feld, L. P., & Frey, B. S. (2007). Tax compliance as the result of a psychological tax contract: The role of incentives and responsive regulation. Law and Policy, 29(1), 102-120. https://doi.org/10.1111/j.1467-9930.2007.00248.x
https://doi.org/10.1111/j.1467-9930.2007.00248.x
Gilligan, G., & Richardson, G. (2005). Perceptions of tax fairness and tax compliance in Australia and Hong Kong ‐ a preliminary study. Journal of Financial Crime, 12(4), 331-343. https://doi.org/doi.org/10.1108/13590790510624783
https://doi.org/10.1108/13590790510624783
Gobena, L. B., & Van Dijke, M. (2016). Power, justice, and trust: A moderated mediation analysis of tax compliance among Ethiopian business owners. Journal of Economic Psychology, 52(1), 24-37. https://doi.org/10.1016/j.joep.2015.11.004
https://doi.org/10.1016/j.joep.2015.11.004
Government Regulation Number 23 of 2018 concerning Income Tax on Income from Business Received or Earned by Taxpayers with Certain Gross Turnover (2018). https://peraturan.bpk.go.id/Home/Details/82680/pp-no-23-tahun-2018
Hair, J. F., Ringle, C. M., & Sarstedt, M. (2012). Partial least squares: The better approach to structural equation modeling? Long Range Planning, 45(5-6), 312-319
https://doi.org/10.1016/j.lrp.2012.09.011
Hanum, L., Ari, D. P. S., & Susilo, H. (2019). Determinant of tax compliance intention in Java Indonesia: Theory of reasoned action approach. Advances in Economics, Business and Management Research, 154, 177-182. http://creativecommons.org/licenses/by-nc/4.0/
Hassan, I. e, Naeem, A., & Gulzar, S. (2021). Voluntary tax compliance behavior of individual taxpayers in Pakistan. Financial Innovation, 7(21),1-23. https://doi.org/doi.org/10.1186/s40854-021-00234-4
https://doi.org/10.1186/s40854-021-00234-4
Kirchler, E., & Wahl, I. (2010). Tax compliance inventory TAX-I: Designing an inventory for surveys of tax compliance. Journal of Economic Psychology, 31(3), 331-346. https://doi.org/10.1016/j.joep.2010.01.002
https://doi.org/10.1016/j.joep.2010.01.002
Kirchler, E., Hoelzl, E., & Wahl, I. (2008). Enforced versus voluntary tax compliance: The "slippery slope" framework. Journal of Economic Psychology, 29(2), 210-225. https://doi.org/10.1016/j.joep.2007.05.004
https://doi.org/10.1016/j.joep.2007.05.004
Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia. (2019). Perkembangan Data Usaha Mikro, Kecil, Menengah (UMKM) dan Usaha Besar (UB) Tahun 2017-2018 (Data Development of Micro, Small, Medium Enterprises and Large Enterprises in 2017-2018). Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia. https://kemenkopukm.go.id/uploads/laporan/1580223129_PERKEMBANGAN DATA USAHA MIKRO, KECIL, MENENGAH (UMKM) DAN USAHA BESAR (UB) TAHUN 2017 - 2018.pdf
Ministry of Finance of the Republic of Indonesia (2020, September). Menkeu Paparkan Realisasi Penerimaan Perpajakan Hingga Agustus 2020 (Minister of Finance Explains Tax Revenue Realization Until August 2020). Ministry of Finance of the Republic of Indonesia. https://www.kemenkeu.go.id/publikasi/berita/menkeu-paparkan-realisasi-penerimaan-perpajakan-hingga-agustus-2020/#:~:text="Penerimaan pajak (hingga Agustus 2020,6%25%2C" jelas Menkeu.
Ministry of Finance of the Republic of Indonesia (2021, September). Ministry of Cooperatives and Small and Medium Enterprises Coordinates Synergy and Collaboration for Cooperatives and SMEs Development. Ministry of Finance of the Republic of Indonesia. https://www.kemenkeu.go.id/en/publications/news/ministry-of-cooperatives-and-small-and-medium-enterprises-coordinates-synergy-and-collaboration-for-cooperatives-and-smes-development/
Murphy, K. (2004). The role of trust in nurturing compliance: A study of accused tax avoiders. In Law and Human Behavior, 28(2), 187-209. https://doi.org/10.1023/B:LAHU.0000022322.94776.ca
https://doi.org/10.1023/B:LAHU.0000022322.94776.ca
Muslichah, & Graha, V. S. (2018). The effect of tax fairnesson tax compliance with trust as an intervening variable. Accounting and Financial Review, 1(2), 78-85. https://jurnal.unmer.ac.id/index.php/afr/article/view/2372/pdf
https://doi.org/10.26905/afr.v1i2.2372
Novikasaria, S. R., Ly, D. Q., & Gershaneck, K. (2021). Taxing micro, small and medium enterprises in Yogyakarta: Regulation and Compliance. Bestuur, 9(1), 43-52. https://doi.org/https://dx.doi.org/10.20961/bestuur.v9i1.49184
https://doi.org/10.20961/bestuur.v9i1.49184
Palil, M. R. (2010). Tax knowledge and tax compliance determinants in self assessment system in Malaysia. In University of Birmingham.
Rachmawan, R., Subekti, I., & Adib, N. (2020). The effect of tax knowledge on relationship of procedural justice perception towards voluntary tax compliance mediated by trust. International Journal of Research in Business and Social Science, 9(4), 207-213. https://doi.org/doi.org/10.20525/ijrbs.v9i4.725
https://doi.org/10.20525/ijrbs.v9i4.725
Regulation of the Minister of Finance of the Republic of Indonesia Number 234/PMK.01/2015 concerning Organization and Work Procedures of the Ministry of Finance (2015). https://jdih.kemenkeu.go.id/fullText/2010/184~PMK.01~2010Per.6.htm
Saad, N. (2011). Fairness perceptions and compliance behaviour: Taxpayers' judgments in self- assessment environments. In University of Canterbury.
Santoso, Y. I. (2021, February). Ekonomi 2020 masih terpusat di Pulau Jawa, ini kata ekonom Core (The 2020 economy is still centered on the island of Java, says economist Core). Kontan.Id. https://nasional.kontan.co.id/news/ekonomi-2020-masih-terpusat-di-pulau-jawa-ini-kata-ekonom-core
Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill-building approach / Uma Sekaran and Roger Bougie. In Wiley & Sons.
Setiawan, D. A. (2020, February). Dinilai 'Tahan Banting', kontribusi UMKM ke pajak diharapkan naik (Assessed capable, MSME contribution to taxes is expected to increase). DDTC News. https://news.ddtc.co.id/dinilai-tahan-banting-kontribusi-umkm-ke-pajak-diharapkan-naik-19020
Statistics Central Bureau of Indonesia. (2019, February). Ekonomi Indonesia 2018 tumbuh 5,17 persen (2018 Indonesian economy grows 5.17 percent). Statistics Central Bureau of Indonesia. https://www.bps.go.id/pressrelease/2019/02/06/1619/ekonomi-indonesia-2018-tumbuh-5-17-persen.html
Statistics Central Bureau of Indonesia. (2020, February). Ekonomi Indonesia 2019 Tumbuh 5,02 persen (2019 Indonesian economy grows 5.02 percent). Statistics Central Bureau of Indonesia. https://www.bps.go.id/pressrelease/2020/02/05/1755/ekonomi-indonesia-2019-tumbuh-5-02-persen.html
Suwiknyo, E. (2020, September). Kepatuhan formal wajib pajak melempem, tren buruk berlanjut (Taxpayer formal compliance sluggish, bad trend continues). Bisnis News. https://ekonomi.bisnis.com/read/20200909/259/1289281/kepatuhan-formal-wajib-pajak-melempem-tren-buruk-berlanjut
The Audit Board of the Republic of Indonesia (2020). Presidential Regulation Number 7 of 2020 concerning Amendments to Presidential Regulation Number 54 of 2020 concerning Changes in Posture and Details of the State Budget for Fiscal Year 2020. https://peraturan.bpk.go.id/Home/Details/139576/perpres-no-72-tahun-2020
Tyler, T. R., Boeckmann, R. J., Smith, H. J., & Huo, Y. J. (1997). Social Justice in a Diverse Society. In Westview Press. Routledge.
van Dijke, M., & Verboon, P. (2010). Trust in authorities as a boundary condition to procedural fairness effects on tax compliance. Journal of Economic Psychology, 31(1), 80-91. https://doi.org/10.1016/j.joep.2009.10.005
https://doi.org/10.1016/j.joep.2009.10.005
Verboon, P., & Goslinga, S. (2009). The role of fairness in tax compliance. Netherlands Journal of Psychology, 65(4), 136-145. https://doi.org/10.1007/BF03080136
https://doi.org/10.1007/BF03080136
Verboon, P., & van Dijke, M. (2007). A self-interest analysis of justice and tax compliance: How distributive justice moderates the effect of outcome favorability. Journal of Economic Psychology, 28(6), 704-727. https://doi.org/10.1016/j.joep.2007.09.004
https://doi.org/10.1016/j.joep.2007.09.004
Wenzel, M. (2002). Tax compliance and the psychology of justice: Mapping the field. In V. Braithwaite (Ed.). Taxing Democracy: Understanding Tax Avoidance and Evasion. Ashgate Publishing Ltd.
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
