Effect of fairness and knowledge on tax compliance for Micro, Small, and Medium Enterprises (MSMEs)

Abstract

This study aims to empirically examine the effect of tax fairness and tax knowledge on tax compliance for Micro, Small and Medium Enterprises (MSMEs). Azmi and Perumal (2008) identified five of tax fairness dimensions: general fairness, exchanges with the government, special provisions, tax rates structure, and self-interest. Tax knowledge related to tax calculation, tax payment, and tax reporting. This study used a survey method by distributing the questionnaire. The sample used was Micro, Small and Medium Enterprises (MSMEs) in Malang city through the cluster random sampling method. The data obtained were 107 respondents who were processed with the help of SPSS 24. Two regression analyses used in this study are multiple linear regression analysis and simple linear regression analysis. The results of the study using multiple linear regression analysis showed that the three dimensions of tax fairness that affect MSMEs compliance are general fairness, tax rates structure, and self-interest. The results from the simple linear regression analysis show that tax knowledge influences MSMEs' compliance.

The Influence of Tax Knowledge on Tax Compliance Behaviour: A Case of Yemeni Individual Taxpayers

“…This result indicates that tax compliance is improved when tax knowledge is higher. The literature shows that this result is similar to numerous previous studies such as those of Nyamwanza et al (2014), Palil (2010, Fauziati et al (2016), Masari and Suartana (2019) and Pertiwi et al (2020). Finally, it could be argued that the analysis confirmed the findings of many previous studies concerning the influence of tax knowledge on the behaviour of taxpayers.…”

“…Mckerchar and Hansford (2015) claimed that the absence of tax knowledge may lead to non-compliance either intentionally or unintentionally. In supporting these assertions, the studies of Manuputty and Sirait (2016), Masari and Suartana (2019), Oktaviani, Kurnia, Sunarto and Udin (2020) and Pertiwi, Iqbal and Baridwan (2020) confirmed that the relationship between tax knowledge and taxpayers' behaviour is significant. Alabede (2012) suggested that gaining tax knowledge is likely to improve taxpayers' compliance behaviour especially in developing countries.…”

“…Oktaviani, Kurnia, Sunarto and Udin (2020) argued that improving tax knowledge of taxpayers, logically, will improve their level of compliance. However, taxpayers from developing countries, including Yemen, commonly do not have adequate knowledge of tax systems and their related practices (Pertiwi, Iqbal and Baridwan, 2020). The present study is likely to be the first study investigating tax knowledge in Yemen, so the output will assess the level of tax knowledge of Yemeni taxpayers.…”

“…Tax knowledge is defined as an understanding of tax policy implemented inside a country (Newman, Charity, & Ongayi, 2018). Pertiwi, Iqbal & Baridwan (2020) explained that tax knowledge is interpreted as everything that is known and understood in relation to tax law. Ahmad, Mustafa and Noor (2007) provided a simple and clear definition of tax knowledge.…”

Strategies to Improve Taxpayers’ Compliance of Indonesian Micro Small and Medium Enterprises: PRISMA Approach

“…During the past monetary crisis, MSMEs could survive and thrive even though many large-scale businesses suffered losses and had to close their businesses. Currently, MSMEs are a type of business which is dominant and becomes an economic milestone in Indonesia because of their contribution to gross domestic product (GDP) reaching 60% (Pertiwi et al, 2020). Currently, the level of compliance and the amount of tax payments from MSME taxpayers are still low.…”