Understanding Tax Non Compliance Behavior of SMEs

Abstract

This research combines a religious perspective in the tax non-compliance model. This research tries to provide a model that includes a religiosity perspective as a model for tax non-compliance. This research will examine the phenomenon of SME tax non-compliance in Batu City by integrating new variables, from social and economic approaches, namely geopolitical differences, tax service quality, public governance quality and system structure, tax system rate, penalty and religiosity. This research provides a model that includes a religiosity perspective as a model for SME tax non-compliance. This research is quantitative (positivist) research. The object of this research is SMEs in Batu City. The population in this study consists of SMEs in Batu City which are spread across the food and beverage business sector under the guidance of the Batu City Cooperatives and SMEs Service, totaling 175 businesses. The research results show several findings. The relationship between religiosity and tax non-compliance shows that the higher the level of religiosity, the lower the level of tax non-compliance compared to people with low levels of religiosity. The relationship between geopolitics and tax non-compliance provides an interpretation that tax non-compliance exists when there is a geopolitical gap. The worse the geopolitical conditions, the higher the level of taxpayer non-compliance. The relationship between the quality of tax services and tax non-compliance shows that tax non-compliance behavior decreases when the quality of tax services is higher. The relationship between the quality of public governance and tax impropriety decreases when the quality of public governance increases. Tax non-compliance behavior increases when tax rates are increased. Meanwhile, the relationship between penalties and tax non-compliance behavior shows that tax non-compliance behavior decreases when penalties increase.